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Syndicated Loan Agreement

Syndicated loan agreement is a type of the loan agreement which usually proposed to the large-scale projects like the infrastructure of the highway, power plant, and oil refinery) that provided by a group of Bank to one Debtor, as the amount of loan is too larger to given by one bank.”

A Bank is a financial service institution that collects funds from public (“saving”) and channels back to whom that may concern for daily consuming, investing, and working capital (“loan”). As stipulated in Law of Republic Indonesia No. 7 of 1992 concerning Banking and its lieu on Law of Republic Indonesia No. 10 of 1998 (“Banking Law”), bank provide loan to another party based of a loan agreement that obligates borrower party (“debtor”) to repay the debt after a certain period with some interest.

Within the development of the bank’s business activities, a group of the bank could provide a load to large-scale projects of the debtor. Typically, large-scale projects (infrastructure of a highway, power plant, and oil refinery) had required substantial funding that too large to given by one creditor/bank. Therefore, the bank has accommodated service based on that purpose, namely as syndicated loan.


As stipulated in Appendix Financial Services Authority Regulation Number 6/POJK.03/2016 concerning Business Activities and Office Network based on Bank’s Capital Core and its lieu on Financial Services Authority Regulation Number 17/POJK.03/2018 (“Banking Activities Law”), Syndicated Loan is a loan provided by a group of the bank to one Debtor, as the amount of loan is too large to given by one bank. Within syndicated loan agreement, the bank could be performed as arranger, underwriter, agent or participant.

Furthermore, the bank has regarded under Financial Services Authority Regulation Number 32/POJK.03/2018 and its lieu on Financial Services Authority Regulation Number 38/POJK.03/2019 concerning maximum credit disbursement limits and major funds provision for commercial banks (“Batas Maksimum Pemberian Kredit” or “BMPK”). BMPK has stipulated loan disbursement limit to the other than Related Parties as a maximum 25% (twenty-five per cent) from bank’s core capital (tier 1).

As well as a large amount of loan, the large-scale project would be present huge risks usually based on a long period of projects and other complexity factors. Consequently, the syndicated loan would help the bank to elude directly risks, such as risks sharing with another bank and BMPK’s limit.


In according to Banking Law, the loan must be based on loan agreement as well as syndicated loan. Furthermore, syndicated loan agreement shall be regarded to Indonesian Civil Code (“ICC”). Article 1338 ICC has stipulated of contract leeway and enforceability among the agreement parties. Following that provision, each bank has the right to regulate provision about the syndicated loan and its agreement based on the bank’s standard and procedure, risk management, and core capital.

However, Financial Services Authority Regulation Number 42/POJK.03/2017 concerning Obligations for Compose and Implementation of Credit Policy or Bank Financing for Commercial Banks has stipulated that bank must oblige provision regarding syndicated loan policy, as follow:

  1. The main policy that stipulates loan procedures to parties which will be syndicated, consolidated, and risk sharing with another bank; and
  2. Approval loan policy that stipulates assessment analysis of principal/lead bank (arranger) by participant Bank.

Furthermore, Bank Indonesia Regulation Number 18/19/PBI/2016 concerning Foreign Currency Transaction towards Rupiah among Bank and Foreign Party has stipulated several criteria for a foreign syndicated loan as follow:

  1. Including Prime Bank as a lead bank as minimum criteria:
    a. Has a given investment rating by the rating agency at last:
    i. BBB- from Standard & Poors;
    ii. Baa3 from Moody’s;
    iii. BBB- from Fitch; or
    iv. Equally with number i, ii, and/or iii based on investment rating by another rating agency, appointed by Bank Indonesia.
    b. Has total assets included in the world’s 200 (two hundred) based on Banker’s Almanac.
  2. Given for project financing in the real sector for productive businesses in Indonesia; and
  3. Contribution of a foreign bank as the syndicated participant is greater than the local bank.

Specific Clauses

In accordance to contract leeway and Article 1320 ICC concerning conditions of validity of an agreement, syndicated loan agreement shall be made under common consent between banks and debtor. Syndicated loan agreement at least contains:

1. Title, place, and time of the agreement;
2. Comparator as agreement’s parties such as Arranger/lead bank, facility agent, security agent, participant bank, and debtor;
3. Recitals, as a premise of an agreement such as debtor’s application letter and offering letter by the bank;
4. Definition, amount of loan (total and each bank’s portion), the purpose of a loan, period of a loan, and interest;
5. Condition and procedure loan withdrawal;
6. Administration fee and arranger fee;
7. Instalment payment;
8. Fine, insurance, account, debtor statement and guarantee;
9. Security;
10. Positive, negative, and information covenant;
11. Event of defaults;
12. Agency (duties, right and obligation);
13. Majority creditor decision; and
14. Governing law, jurisdiction, and language.

Author: Kristalia Andiani Puteri

Gaffar & Co., Indonesian Boutique Law Firm which specializing and focus on commercial law areas e.g. Capital Market & Financial Service.

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