ING's structured finance group has announced the closing of a $100 million term loan facility for PT Indofood, Indonesia's leading processed food manufacturer and reputedly the world's biggest producer of instant noodles.
According to ING, which lead managed the deal, the transaction represents the largest offshore loan financing for an Indonesian corporate since the start of the Asian financial crisis in 1997.
With the loan, Indofood was able to secure two-year financing at a cost of 250 basis points over Libor (currently 3.44%), which an official said was considerably more attractive than what would have been available with a bond deal.
"At this moment in time, this represents a very cost efficient way for Indonesian credits to finance themselves," an ING official says. "Although the maturities are different, the government's 2006 bond is currently offering 256bp over five year US treasuries, which is now around 4.58%. So you can imagine that an Indonesian corporate would have to pay a significant premium over that."
Perhaps a more appropriate comparison could be made to the recent $100 million five-year bond by PT Medco, which was launched at 585bp over US treasuries.
As offshore financing opportunities have been closed off to most Indonesian corporates since 1997, the official believed it was futile to compare the pricing for this deal to anything Indofood did before the crisis.
"It's a tricky thing to try and compare pricing because Indonesia was an investment grade credit prior to the crisis and now it's sub investment grade [B3/CCC+ by Moody's and S&P," the official explains. "It is a different world and investors have shown a lot more circumspection with Indonesia. However, there are some Indonesian credits that we have confidence in, which I think this transaction shows."
ING is considered house bank to the group and has previously acted as co-arranger on a $250 million syndicated loan and as lead manager in 2000 on a Rs1 trillion five-year domestic bond deal.
