Credit Suisse arranges Pertamina?s $500 million loan

Credit Suisse is asking banks to join a US$500 million loan to provide Indonesia?s PT Pertamina with funds for the state-owned oil company?s exploration and production projects, bankers close to the deal said, The Jakarta Post reported on Saturday.

The five-year loan will be repaid in 16 quarterly installments after the first year. The bank is arranging an initial $300 million and will increase that to $500 million depending on interest shown by other lenders, the bankers said. Credit Suisse is sending out invitations today, they said.

Credit Suisse is offering banks an interest margin of as much as 2.5 percentage points over the London interbank offered rate, a benchmark for borrowing. Three-month Libor was fixed at 4.71 percent Thursday.

Pertamina plans to use the money to expand its domestic oil production to reduce reliance on imports. Indonesia brings in about one-third of its oil requirement each year from overseas because its daily refining capacity of 1.06 million barrels isn?t sufficient to meet local fuel demand.

Most of the funds raised will be used to expand production in Cepu, East Java, Pertamina?s Finance Director Alfred Rohimone said on Dec. 12. Cepu contains Indonesia?s largest untapped oil reserves. The loan will also finance other oil projects as agreed in the loan document, the bankers said.

Development of the Cepu field has been stalled for more than four years because of a dispute between Exxon Mobil Corp. and Pertamina over who should be the operator of the field. Pertamina is stepping up efforts to resolve the dispute so it can start developing the block, which is estimated will yield up to 170,000 barrels of oil per day.

The Pertamina loan comes before a $500 million bond sale, the company?s first U.S. dollar-denominated bond. Pertamina has appointed Ernest & Young LLP to audit its books for the debt sale and plans to appoint an adviser next quarter, Rohimone said on Jan. 13.

?We expect to finish the audit of our financial performance in July and start selling the bonds in September,? Rohimone told reporters in Jakarta on Jan. 13.

The Switzerland-based Credit Suisse Group on Jan 16 dropped the First Boston name from its investment banking unit. (*)