Procedure of Procuring Financing From Foreign Private Creditors

Background

Procedure of procuring financing from foreign private creditors (“FPC”) is governed under Minister of Finance Regulation No. 45/PMK.08/2014 of 2014 (“MFR No. 45/2014”). This regulation has been enforced to renew the previous one, namely  Minister of Finance Regulation No. 14/PMK.08/2012 of 2012 (“MFR No. 14/2012”) which is considered inappropriate with the current condition.

Types of Financing

Several types of financing that are offered are in the form of:

  1. single loan, given by FPC to finance a certain activity or package of activities;
  2. club deal, given jointly by more than one FPC put in a separate loan agreement for each FPC to finance a certain activity or package of activities and or;
  3. syndicated loan, given jointly by more than one FPC coordinated by one or more than one FPC put in a loan agreement to finance a certain activity or package of activities.

Requirements for prospective Foreign Private Creditors

Prior implementing financing procurement from FPC, it is necessary to conduct selection towards prospective FPC by the selection Committee (“Committee”).

The Committee (i) is determined by the directorate general on behalf of Minister of Finance (“MoF”) or official appointed by the MoF; (ii) is chosen from civil servants; (iii) is in odd number consisting of at least 3 (three) people.

This selection is carried out limitedly. Limited selection is a selection method with the number of candidates capable of realizing and fulfilling requirements believed to be limited (“Limited Selection”). Limited Selection is conducted through a request by the government to prospective FPC that meet the criteria to  express interest in extending loans to finance certain activity, which is known as Request for Interest (“RfI”). The criteria of such prospective FPC are:

a. ever or still having commercial loan portfolio to the government;

b. having conveyed letter of reply regarding statement of interest to extend a loan/Letter of Interest (“Lol”) after receiving notification from:

  1. the state minister/agency, regional government, state-owned enterprise;
  2. prospective supplier of goods/services and/or;

c. constituting potential prospective FPC based on the result of identification by thr Directorate General of Debt Management (“DGDM”).

Preparation, Execution, and Naming of Selection of Prospective FPC

Preparation selection of prospective FPC is executed by the DGDM by considering several activities which as follows:

  1. drafting an Initial Shortlist or list of prospective FPC that is recognized as RfI’s beneficiary (“Initial Shortlist”);
  2. drafting RfI;
  3. providing RfI to prospective FPC included in the Initial Shortlist of prospective FPC;
  4. receiving LoI from prospective FPC; and
  5. calculation of feasible terms and conditions of financing offer from prospective FPC measured by effective cost approaches, known as Benchmark (“Benchmark”).

Execution of prospective FPC selection is performed by the Committee in several phases of selection as follows:

  1. preparation selection documents and selection schedule;
  2. granting of proposal or Request for Proposal (“RfP”) to prospective FPC that has already submitted Lol;
  3. acceptance of letter of reply or Loan/Financing Proposal (“L/FP”) on RfP by prospective FPC;
  4. evaluation of L/FP from prospective FPC;
  5. compiling prospective FPC based on offer that does not exceed benchmark.

Naming of selection winner of prospective FPC, determined by the directorate general or relevant official that is appointed by the MoF. Announcement regarding selection winner of prospective FPC is notified to candidates by the Committee no later than 5 (five) working days after receiving letter of decision on the naming of winner from directorate general.

The winner of selection of prospective FPC submits a written statement of readiness to provide loans to finance certain activity or package of activities in the form of commitment of financing procurement from selected FPC or Letter of Commitment (“LoC”) no later than 7 (seven) working days after FPC receiving letter of decision on the naming of the selection winner. Furthermore, a follow up to LoC from selected FPC is made by structural unit of DGDM by holding negotiations and signing a loan agreement with the selected FPC.

Sanction

Prospective FPC as selection winner who has resigned or cannot continue commitment to financing will be excluded from the selection of prospective FPC for the next 1 (one) year or 5 (five) periods of selection.

Panji Satria

No Comments Yet.

Leave a comment