July 28, 2020 | Regulatory Updates

The Financial Service Authority (Otoritas Jasa Keuangan or OJK) has issued OJK Regulation No. 30/POJK.04/2019 concerning Issuance of Debt Securities and/or Sukuk on Private Placement (“POJK No. 30/2019”), which came into force on 1 June 2020.

With it, in effect, the OJK puts in place a strictly-procedural framework on matters concerning the issuance of Debt Securities and/or Sukuk on Private Placement (Efek Bersifat Utang or EBUS).

In it, any party who wishes to issue EBUS will from then on be required to submit specific registration forms to the OJK.

The officially stated intention of such a move is to help them in their attempt to protect investors whom are inclined and prepared to purchase EBUS which are offered through mechanism outside of the usual method of public offering;

Wherein those "alternative" debt instruments are not and cannot be guaranteed by the Indonesian Deposit Insurance Agency (Lembaga Penjamin Simpanan or LPS). 

Thus, as Medium Term-Notes (MTN) are debt securities which can be and are offered without public offering, all issuance procedures of MTNs have since become subject of the POJK No. 30/2019.

More pertinently however, within this new legislation, the OJK has seen fit to decree that henceforth only "Professional Investors" are permitted to buy EBUS. 

"Professional Investors" in this case is defined as parties who possesses the capability of not just to purchase such debt securities, but to also analyze the risks involved in such investments.

Included as such are: 

(i) financial services institutions; and 

(ii) any individual capable of self analysing the risks of investment in securities, has the experience of investing in the capital market (for at least 1 year), possesses a net asset of at least IDR10 billions (excluding lands, buildings, or any other intangible assets); or 

(iii) any legal entity, joint venture, association, or any organized group capable of performing risk evaluations on debt securities investments, has experience of investing in the capital market (for at least 1 year), and boast a net asset of at least IDR20 billions (excluding land, property, or any other intangible assets).

With regard to each EBUS's credit rating, EBUS issuers will be required to obtain investment gradings from approved credit rating agencies listed under the OJK. This provision will also be required when the issuer conducts EBUS shelf offering.