Latham & Watkins and Milbank Tweed Hadley & McCloy have both had roles to play on the sale of Indonesian telecommunications company PT Mitra Global Telekomunikasi (MGTI) to an Indonesian investment firm.
MGTI shareholders agreed on 20 January to finalise the sale of the company to Saratoga Investama Sedaya subsidiary Alberta Telecommunication for US$266m.
Running fixed-line services in central Java, MGTI is 30.6% owned by Indonesia Satellite Corp. Other shareholders are Australia's Telstra Corp., which holds a 20% stake, and Nippon Telegraph & Telephone Corp., which owns 15%. Local investors hold the remaining stake.
Singapore-based partners Mark Nelson and Jake Redway led the Latham team acting for Saratoga, which under the agreement will assume MGTI's debt.
In what is the first Indonesian telecom loan since the 1997 Asian Financial Crisis, MGTI secured syndicated loans worth US$215m to help finance its purchase and assume its debt. DBS Bank of Singapore and PT Bank Mandiri arranged the loans.
Singapore-based partner David Zemans led the Milbank Tweed team advising the lenders on the US$215m facility, which has a tenor of five years, pays an interest rate of Libor plus 6%, and is an amortising loan with a three-month grace period. The facility refinances a bridge loan that DBS extended to MGTI when Alberta Telecommunication acquired all of the shares of MGTI from the existing shareholders. Proceeds of the loan will be used by MGTI to refinance its existing debts.
Coordinating arrangers DBS and Bank Mandiri closed the syndication of the loan to six other banks: ABN AMRO Bank N.V., PT Bank Danamon Indonesia, PT Bank DBS Indonesia Tbk, PT Bank Internasional Indonesia Tbk, ING Bank N.V. and PT Bank Rabobank International Indonesia.
In addition to its role as lender and coordinating arranger, DBS also acted as administrative agent, facility agent and security agent.
Zemans believes the successful syndication of the MGTI loan, together with the recent US$350m bond deal for Indonesian mobile operator Excelcomindo, illustrates foreign investors' renewed confidence in Indonesia's economy and growth prospects - particularly in its telecom sector.
"[This] further demonstrates foreign investors' renewed interest in Indonesia's telecom sector, which currently has only a 15% penetration rate in a rapidly growing economy."
MGTI is one of five foreign-owned joint ventures set up in 1995 to offer telephone services in Indonesia until 2010.
The Indonesian government had welcomed the start up of the joint ventures to help boost the telecommunications infrastructure in the jurisdiction's provinces, in return for more than 30% of their revenue to state-owned PT Telekomunikasi Indonesia (Telkom).
Well-known Indonesian business tycoon Edwin Soeryadjaya and a number of financial investors control Saratoga. After the purchase of MGTI, Saratoga will become a silent partner and will only receive a fixed minimum investment revenue from Telkom. This is expected to equate to around US$60m per year until 2010, when Saratoga will have to end the 15-year joint venture and return all assets of MGTI to Telkom.