Indonesia Capital Markets Deal: Pertamina Hulu Energi’s US$2.5bn debut loan

IFR Asia Awards 2022
2 min read
Chien Mi Wong

Drilling deep

Pertamina Hulu Energi made a striking debut in the syndicated loan market with a US$2.5bn multi-tranche borrowing that brought the Indonesian market to life following more than a year of tepid activity.

Thanks to the strong parentage – the borrower is the upstream unit of state-owned oil giant Pertamina – the borrowing overcame difficult market conditions to become the largest syndicated loan for an Indonesian corporate in 2022 and the first from the group since 2016.

Syndicating a jumbo loan amid global recessionary concerns, geopolitical uncertainty and rising interest rates was not an easy task. Moreover, pricing was relatively thin with an amortising US$1.7bn five-year piece paying interest margins of 90bp (offshore) and 100bp (onshore) over term SOFR, and a US$400m two-year bullet tranche offering 50bp (offshore) and 60bp (onshore).

Another factor weighing on the deal was the borrowing requirement for parent Pertamina. With the G3 bond market volatile in 2022, Pertamina relied heavily on the offshore loan market for funding, and in May clubbed a five-year facility of around US$1.45bn-equivalent with a dozen lenders.

Pertamina Hulu Energi’s borrowing drew a diverse group of 18 lenders in general syndication in a snappily executed transaction. Syndication wrapped up in mid-September within a couple of months of launch in mid-July, even though volatility in global financial markets had stretched syndication timelines for many other borrowers in Asia to three months or longer in a risk-averse environment.

Pertamina Hulu Energi also managed to achieve tighter pricing than its parent. The latter launched a US$1.4bn new-money borrowing in November comprising one and three-year tranches paying a top-level blended all-in pricing of 112.37bp based on margins of 62.73bp and 77.5bp over SOFR respectively and a blended remaining life of 2.26 years.

With nine banks as underwriters, Pertamina Hulu Energi’s borrowing began on a solid footing despite the large size. Its successful outcome was also in part due to two Indonesian lenders among the leads taking up a US$400m amortising seven-year portion, which was not syndicated.

While the borrower is from the oil and gas sector, participating lenders were reassured that Pertamina Hulu Energi’s sustainability strategy is aligned with that of its parent’s, incorporating environmental, social and corporate governance into its policies and activities to support its sustainable development goals.

Thanks in part to Pertamina Hulu Energi’s financing, the offshore loan market for Indonesian credits sprung to life in the second half of 2022, making it the best-performing among major loan markets in Asia as volumes skyrocketed a whopping 112.4% year on year to US$21.8bn.

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