2003 Activity Highlighted by Milbank Successfully Closing Indonesian Government’s Privatizations of Bank Rakyat Indonesia, PGN and Indocement
HONG KONG/SINGAPORE, February 26, 2004 – Despite tremendous civil and political unrest, 2003 was a watershed year for the Indonesian Government’s privatization program. Successfully completing the sale of its stakes in several companies generated approximately 8 trillion rupiah (US$939.1 million) for the Government, exceeding its target for privatizations of 6.2 trillion rupiah stated in the country’s 2003 budget. The international law firm Milbank, Tweed, Hadley & McCloy LLP played a leading role in several of these privatizations, as well as in a number of other significant deals in Indonesia in 2003, encompassing capital markets, acquisition financing, project financing and restructuring transactions. Active in Indonesia for many years, the firm reached a record level of activity in Indonesia in 2003.
BANK RAKYAT INDONESIA (BRI):
The most significant government privatization transaction to close in the Indonesian market in 2003 was the US $480 million Bank Rakyat Indonesia (Persero) (“BRI”) initial public offering (IPO), the largest IPO in Indonesia since the 1997 Asian financial crisis. Milbank represented Bank Rakyat Indonesia and the Government of the Republic of Indonesia, acting through the Ministry of State-owned Enterprises (“MSOE”), in an initial offering of shares on the Jakarta Stock Exchange with an international offering under Rule 144A/Regulation S initial offering of shares. Bank Rakyat Indonesia is one of the world’s most successful microfinance institutions, serving a very profitable niche in the Indonesian banking sector.
Commenting on the transaction, Milbank partner Anthony Root noted, “In addition to being the largest Indonesian equity issue since the 1997 financial crisis, the BRI deal has raised the bar for privatizations in Indonesia. The documentation of the domestic tranche matches international standards, and includes the same representations and warranties as the international offering, thereby establishing a template for future privatizations. This will bring the local market in line with international practice, which in turn, is expected to increase foreign investors’ confidence in the country.”
The IPO included an offering of secondary shares by the MSOE as part of the Indonesian government’s privatization plan as well as an offering of primary shares of BRI intended to increase BRI’s capital. Prior to the IPO, BRI was 100% owned by MSOE; after the IPO (including exercise of the greenshoe and redshoe options) the MSOE will own 59.5% of BRI.
Milbank also represented BRI in its recent debt offering of US$150 million 7.75% subordinated notes due –. The notes were sold to international investors in reliance on Regulation S.
The Milbank team representing BRI and the Government of Indonesia (through MSOE) was led by partners Anthony Root (Hong Kong), David Zemans (Singapore) and Doug Tanner (Palo Alto), and associates Naomi Ishikawa, Jessica Albrecht and Giles Kennedy (all in Singapore), with support from Andrew Walker, Jane Shih and others from New York.
In addition to BRI, the Indonesian Government completed several other major privatization transactions in 2003, including PGN and Indocement:
PGN, the first privatization to close in 2003, ensured that the government would achieve its budget for the year. Milbank represented the underwriters ABN AMRO Rothschild, Credit Suisse First Boston and Danareska Sekuritas in the IPO of shares in Perusahaan Gas Negara (“PGN”). The equity offering consisted of a primary offering of US$150 million by PGN on the Jakarta Stock Exchange and the Surabaya Stock Exchange, and an international secondary offering of US$150 million by the Government of Indonesia under Rule 144A and Regulation S. PGN, a gas transmission and distribution company, currently has a 91% market share of gas sales in Indonesia.
The Milbank team involved in the PGN transaction was led by partners Anthony Root and Douglas Jones (Hong Kong), and associates Naomi Ishikawa and Melissa Lewis (Singapore).
The sale of Indocement was the final divestiture by the Government of Indonesia in the country’s second-largest producer of cement, and raised US$98 million (824 billion rupiah) for the government. Milbank represented placement agents J.P. Morgan Securities Ltd. and PT Danareska Sekuritas in the block trade of the Government of Indonesia’s 13% stake in PT. Indocement Tunggal Prakarsa Tbk (“Indocement”). The international investors were located in Asia, Europe and the U.S. Milbank’s capabilities in the international capital markets was critical to the success of the deal. – As counsel to the placement agent, Milbank negotiated and drafted all deal documentation, which included a Placement Agreement (governed by New York law), an Underwriting Agreement (governed by Indonesian law), an Agreement Between Distributors (governed by New York law) and various side letters (governed by New York and Indonesian law). Documentation was signed on October 23, 2003 and the deal closed on October 28, 2003.
The Milbank team representing the placement agents was led by partners Anthony Root, Gary Wigmore (Singapore), David Zemans, and Kevin Muzilla (London), and associate Jacqueline Rose (Hong Kong).
In addition to its important role in the government’s privatization program, Milbank was involved in other significant Indonesian transactions closing in 2003, including sophisticated and complex capital markets, mergers & acquisition financings, project financings and restructuring transactions spanning a broad range of industries. (Additional information is provided in the accompanying SUMMARY OF MILBANK’S DEALS IN INDONESIA IN 2003.)
With offices in Asia for 25 years, Milbank has one of the deepest and broadest practices among U.S. firms in Asia, with practices encompassing capital markets, M&A and acquisition finance, project finance, restructuring, structured products transactions, leasing and transportation finance. Milbank currently has approximately 35 attorneys resident in its Hong Kong, Singapore and Tokyo offices, with attorneys qualified to practice New York and English law.
Milbank continues to be at the forefront of some of the most notable deals in Asia. In 2001 and 2002, Milbank’s Tokyo, Hong Kong and Singapore offices closed 61 transactions throughout the region, with a total value of nearly US$39 billion, including the largest corporate debt offering ever in Asia, the largest distressed deal ever in Asia, and two of the largest private equity deals in Asia in 2003. Milbank has played an active role in landmark transactions spanning virtually every Asian country and across diverse industries.
Milbank, Tweed, Hadley & McCloy LLP is a premier global law firm headquartered in New York, with offices in Washington, DC, Los Angeles, Palo Alto, London, Frankfurt, Tokyo, Hong Kong and Singapore. Milbank is a recognized leader in mergers and acquisitions, capital markets and corporate finance, project finance, acquisition finance, restructuring, and other major fields of legal practice. Milbank provides both English and U.S. law capabilities to its clientele, and provides a full range of services to many of the world’s leading financial, industrial and commercial enterprises, as well as governments, institutions and individuals.
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