denotes premium content | Jan 6 2009 
Feature
posted 23 Feb 2005 in Volume 8 Issue 4
Samsung & Telkom, Indonesia: Kexim shows its strength
Arranger: Citigroup
Borrower: PT Telekomunikasi (Telkom)
Lender: Export Import Bank of Korea (Kexim)
Debt amount: $124m
Supplier/contractor: Samsung
Project size: $170m
Debt amount: $124m
Availability period: three years
Maturity: eight years
Closing: August 2003
Second phase of transaction (receivable discounting):
Arranger: Citigroup
Borrower: Samsung
Facility amount: $100m
Purchaser: Citicorp Investment Bank Singapore
Maturity: seven years
Closing: May 2004
In May 2004, Citigroup, acting as financial adviser to Samsung and sole lead arranger, closed the second phase of the largest information-technology deal in Kexim’s history.
It is the biggest single ECA transaction executed in Indonesia since the Asian financial crisis and also Kexim’s first unsecured ‘corporate’ transaction (ie, unsecured export credit transaction without a bank or sovereign guarantee) in Indonesia. The deal marks Citi’s first financing with Kexim.
The project marks a major breakthrough for Samsung’s CDMA network franchise and customer-finance team – it is its first major CDMA sale outside of Korea, Japan and the US.
The transaction is an end-to-end solution, comprising two phases: the Kexim financing arrangement and a receivable discounting financing arrangement.
The transaction structure complies with Telkom’s PAYG financing requirement, which dictates that equipment vendors receive payment according to use of installed equipment rather than 100% payment at commissioning.
To achieve this requirement, the transaction incorporated an escrow account, which is used to warehouse Kexim disbursements, until PAYG payment triggers are met and cash is released.
Citi provided the $100m receivable purchase facility to Samsung on a non-recourse basis. To mitigate all Telkom and Samsung default risks, the funds were channelled through a charged account, overlaid with two trust structures, and where Citi has restricted powers of attorney and various other step-in rights under specific circumstances.
