“Offshore loan is one of the sources of financing the domestic economy, it needs to be managed properly by nonbank corporations in order to provide an optimal contribution to the national economy and not cause disruption to macroeconomic stability.”
Definition of Offshore Loan:
Offshore loan, hereinafter referred to as ULN, is a debt of a population to non-residents in a foreign currency and/ or Rupiah, including financing based on sharia principles.
Offshore Loan Category:
a.loans in Rupiah or foreign currency from non-residents based on a loan agreement;
b.securities both in Rupiah and foreign currency issued on international financial markets;
c.securities both in Rupiah and foreign currencies sold over the counter (“OTC”) to Non-Residents;
d.securities in foreign currency issued in domestic financial markets;
e.securities in foreign currency that are sold OTC to residents;
f.liabilities in the form of demand deposits, time deposits, savings, call money and other liabilities to Non-residents in both Rupiah and foreign exchange;
g.the form of liabilities and securities as referred to in letter a to letter f based on sharia principles.
Limitation of ULN:
a. Hedging Ratio:
Non-Bank Corporations holding Foreign Currency External Debt are required to meet certain minimum Hedging Ratios by conducting Foreign Currency Hedging transactions against the Rupiah.
Minimum Hedging Ratio of 25% (twenty five percent) of a) the negative difference between Foreign Currency Assets and Foreign Currency Liabilities, which will be up to 3 (three) months from the end of the quarter; and b) the negative difference between Foreign Currency Assets and Foreign Currency Liabilities, which will be more than 3 (three) months to 6 (six) months ahead from the end of the quarter.
b. Liquidity Ratio: Non-Bank Corporations that have ED in Foreign Exchange must fulfill a certain minimum Liquidity Ratio by providing adequate Foreign Currency Assets against Foreign Currency Liabilities that will be due in the next 3 (three) months from the end of the quarter. The minimum liquidity ratio is as low as 70% (seventy percent).
c. Credit Rating: Nonbank Corporations that carry out external debt in foreign currencies must fulfill a minimum Credit Rating equal to BB- issued by a rating agency recognized by Bank Indonesia.
Obligations for Offshore Loan Debtor:
1.Any foreign exchange foreign exchange withdrawal (“DULN”) must be received by an ULN Debtor through a Foreign Exchange Bank;
2.The receipt of the DULN as referred to in number 1 must be reported by the ULN Debtor to Bank Indonesia;
3.The obligations as stipulated in number 1 apply to DULN in the form of funds originating from:
a.External debt based on a loan agreement in a non-revolving form;
b.External debt based on debt securities.
4.The obligations referred to in number 3 also include the DULN derived from the difference between the value of new external debt and the purpose of refinancing, against the value of the old external debt;
5.The new external debt as referred to in number 4 includes external debt based on a loan agreement and debt securities;
6.The old external debt as referred to in number 4 includes external debt based on a loan agreement, debt securities, and trade credit in the form of goods;
7.The value of each DULN receipt must be equal to the value of each ED withdrawal;
8.The accumulated value of DULN receipts must be the same as the value of ULN commitments;
9.The value of external debt as referred to in number 8 is in the form of external debt stated in the loan agreement document or nominal listed in the debt securities.
Gaffar & Co.
Gaffar & Co. is an Indonesian Boutique Law Firm that Focus on Commercial Law Area (Corporate, Capital Market and Commercial Dispute Resolution).
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Author: Belle Risca Junia / Arif Gaffar
