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Mezzanine Loan Agreement Template for Indonesia

A comprehensive financing agreement governed by Indonesian law that establishes the terms and conditions for a mezzanine loan facility, which sits between senior debt and equity in the capital structure. The agreement details the hybrid characteristics of mezzanine financing, including debt servicing, security arrangements, and potential equity conversion rights, all while ensuring compliance with Indonesian banking regulations and corporate law. It includes specific provisions for interest payments, conversion mechanics, subordination to senior debt, and security arrangements, tailored to meet Indonesian regulatory requirements and market practices.

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What is a Mezzanine Loan Agreement?

The Mezzanine Loan Agreement is a sophisticated financing instrument used when companies require additional funding beyond traditional senior debt but are not ready for pure equity investment. This document is particularly relevant in the Indonesian market where growing companies often need flexible financing solutions to fund expansion, acquisitions, or major capital expenditures. The agreement addresses key aspects such as subordination to senior debt, security arrangements, and equity conversion rights, while ensuring compliance with Indonesian financial regulations, including OJK (Financial Services Authority) requirements and Bank Indonesia regulations. The document typically includes comprehensive provisions for interest calculation methods, repayment terms, financial covenants, and detailed conversion mechanics, making it suitable for complex financing structures in the Indonesian context.

What sections should be included in a Mezzanine Loan Agreement?

1. Parties: Identification of the lender(s), borrower(s), and any guarantors or security providers

2. Background: Context of the transaction, including the purpose of the loan and its relationship to senior debt facilities

3. Definitions and Interpretation: Definitions of key terms and interpretation rules, including Indonesian law-specific terminology

4. The Facility: Details of the loan amount, purpose, and availability period

5. Interest and Fees: Interest calculation, payment dates, default interest, and all applicable fees

6. Conversion Rights: Terms and conditions for converting the loan into equity, including trigger events and conversion price mechanisms

7. Repayment and Prepayment: Scheduled repayment terms, voluntary and mandatory prepayment provisions

8. Security: Description of security package and ranking relative to other debt

9. Representations and Warranties: Standard and transaction-specific representations and warranties

10. Covenants: Financial and operational covenants, including information requirements

11. Events of Default: Circumstances constituting default and consequences

12. Changes to Parties: Transfer and assignment provisions

13. Administration: Payment mechanics, notices, calculations

14. Governing Law and Enforcement: Choice of Indonesian law and jurisdiction provisions

15. Subordination: Provisions regarding ranking and subordination to senior debt

What sections are optional to include in a Mezzanine Loan Agreement?

1. Intercreditor Provisions: Required when there are multiple creditors or tranches of debt

2. PIK Interest: Include when payment-in-kind interest is part of the structure

3. Currency Protection: Required for multi-currency facilities or if loan and revenue currencies differ

4. Tax Gross-Up and Indemnities: Detailed tax provisions if cross-border elements exist

5. Bank Account Provisions: Required when specific account structure or cash management system is needed

6. Shareholder Rights: Include when mezzanine lender receives specific shareholder rights pre-conversion

7. Industry Specific Provisions: Required for regulated industries or specific sector requirements

8. Multiple Lender Provisions: Include for syndicated mezzanine facilities

What schedules should be included in a Mezzanine Loan Agreement?

1. Form of Drawdown Request: Standard form for requesting loan disbursements

2. Conditions Precedent: Detailed list of required documents and conditions

3. Security Documents: Forms of security documents and filings required under Indonesian law

4. Conversion Mechanics: Detailed procedures and calculations for equity conversion

5. Financial Covenants: Detailed calculations and definitions for financial covenants

6. Form of Transfer Certificate: Standard form for transfers of loan participations

7. Repayment Schedule: Detailed amortization schedule if applicable

8. Form of Compliance Certificate: Template for periodic compliance reporting

9. Security Perfection Requirements: Checklist of Indonesian law security perfection requirements

10. Shareholders Agreement Terms: Key terms to be included in shareholders agreement upon conversion

Authors

Alex Denne

Advisor @ 蜜桃传媒AI | 3 x UCL-Certified in Contract Law & Drafting | 4+ Years Managing 1M+ Legal Documents

Jurisdiction

Indonesia

Document Type

Loan Agreement

Sector

Banking

Cost

Free to use

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