Capital Raising Fakultas Ekonomi Universitas Indonesia

Overview of Financing Alternatives

Public Company

Asset Sale Equity Capital Markets

M&A Private Placement

Marketed Offering

Overnight Block Trade (Primary / Secondary)

Convertible / Exchangeable Bond

Rights Offering

Private Funding Alternatives

Private Company

Shareholder Loan

Credit Line

Private Placement

Initial Public Offering (IPO)

Reverse Takeover

Spin Off IPO

Follow-on Offering

Public Fund Alternatives

Debt Capital Markets

High Yield

High Grade

Capital Raising

A companys financing needs change constantly depending upon: Growth profile Credit rating Financial health / cash position Strategic planning M&A activity

2

Objective and use of proceeds (capital expenditures, acquisition,

working capital, refinancing, capital reallocation etc)

Capital structure position (gearing, capitalization, debt coverage, Interest coverage, impact on rating etc)

Cash flow profile (current and projected cash flow)

Stock price (overvalued, undervalued)

Global capital market condition and outlook (credit and equity market liquidity and sentiment)

Access to conventional financing (eg. bank loan)

Timing

Sector and business outlook

Pricing

Capital Raising

Considerations Between Raising Debt and Equity

Factors That Drive Decision Making Process

3

Capital Raising

Initial Public Offerings

First time listings, offer shares to public Expand financing alternatives

Follow-ons/ Rights Offerings

Primary offering post listing No dilution to existing shareholders (assuming rights are fully

exercised) Fully underwritten

Follow-ons/ Block Trades

Typically secondary sales Transaction is executed in an overnight or accelerated placement Priced relative to technical (size, float, liquidity, volatility) and

fundamental (research, earnings, valuation) benchmarks

Convertible Offerings

Hybrid securities Taps different shareholder base Priced relative to volatility, interest/credit profile, valuation

Equity Capital Market Financing Alternatives

4

IPO Process

Diversify Investor Base Efficient Means Of Realizing Value For Current Shareholders

Expand Financing Alternatives And Reduce Overall Cost Of Capital

Enhance Commercial Visibility

Reinforce Public Accountability

Attract And Retain The Best Management And Employees

Create Stock Currency For Acquisitions

Creates Liquidity For The Issues And Shareholders

Why Become a Public Company?

5

IPO Process

Who Will be Involved?

Independent Appraiser

Share Registrar

Public Relations Firm

Notary OTHERS

Industry Consultant

Printer

ISSUER

Assist issuer counsels and Bookrunner in matters of international law

Assist issuer counsels and Bookrunner in matters of Indonesian law

Prepare audited financial accounts, provide comfort letter

Underwriter Counsel Domestic

Underwriter Counsel International

Accountants

Bookrunner

Manage overall process together with Company & Shareholders

Legal audit, provide legal opinion

Issuer Counsel International

Draft prospectus / documentation and assist issuer in the process

Issuer Counsel Domestic

6

Phase I Preparation and Strategic Advice

Corporate governance

Shareholder structure

Legal and accounting preparation

Regulatory requirements

Selection of key advisors

Listing decision Offering structure & format

Phase II Due Diligence, Documentation and Regulatory Process

Kick-off: organisational meeting with advisors

Due diligence Prospectus drafting

Filing with exchange

Draft underwriting agreement/ documentation

Phase III Review and Marketing Preparation

Valuation Create marketing story

Prepare research analyst presentation

Prepare and rehearse roadshow presentation

Respond to exchange comments

Phase IV Offering

Release pre-deal research

Set size and price range

Print prospectus Roadshow presentations by management

Phase V Pricing and Closing

Determine offering price

After-market trading Closing Ongoing research coverage

Manage press strategy

Commence investor relations program

IPO Process

Overview of the IPO Process

Typically a 6 - 7 months process 7

IPO Process

Considerations on Sizing of Offering

Optimal IPO Size Create Liquidity For The Stock In The Aftermarket Secure Sustained, Quality Research Sponsorship

Fulfil Primary Capital Needs

Take Account Of Market Appetite And Environment

Comply With Regulatory Requirements: Typical Freefloat Aim Is > 20%

Satisfy Existing Shareholders Objectives

8

Overview After pre-marketing of research, Company

and bookrunners agree on a price range Starting on the first day of the roadshow,

and throughout its duration, investors place orders Orders include limit price and size of the

order Pricing after bookbuilding in accordance

with demand and price sensitivity Bookrunners Role Throughout the bookbuilding process, the

bookrunners will sell the issuance and provide clarification

On daily basis, keep track of the orders and record all orders placed through the syndicate

IPO Process

Bookbuilding Institutional Investors

250350 400

600750 800

1,000

1,250

1,500

0

400

800

1,200

1,600

2,000

1 2 3 4 5 6 7 8 9

US$m Tier I US$m Others

Illustrative Example of Daily Build-Up Demand Assuming $500m Equivalent IPO Size

Tier 1 Subscription Level: 2x

Overall Subscription Level: 3x

9

IPO Process

Pricing Mechanism

Valuation Range

Higher

Lower Research analyst presentation

Pre-Research publication

Price range at the time of preliminary prospectus

Preliminary prospectus distributed

IPO pricing agreed

IPO Price

The Path to the IPO Price

10

Stabilisation One of the bookrunners is appointed stabilisation agent by the company The stabilisation agent will have the possibility to use the overallotment

option (Greenshoe) as a stabilisation mechanism

Sales & Trading

Sell research product to market Maintain liquidity

Research Regular reports published Marketing of the company to investors Investor visits

Investor Relations / Corporate Brokerage

Investor Relations advice Investor Relations roadshows and conferences Market updates Information on trading flows Investor targeting

IPO Process

Post Listing Support

11

MNC Sky Vision US$227MM IDX IPO IPO Case Study

12

Issuer PT MNC Sky Vision Tbk (MSky)

Selling Shareholder PT Bhakti Investama Tbk

Total Shares Offered 1,413MM shares (2-% of enlarged TSO), upsized from 1,100MM shares (16% of enlarged TSO)

Listing Venue Indonesia Stock Exchange (IDX)

Primary/Secondary Approximately 60% primary, 40% secondary

Pricing/Listing Date June 22 / July 9, 2012

Offer Price (Price Range) IDR1,520 (IDR1,460 1,750)

Tranche Structure Institutional 99% / Retail 1%

Joint Global Coordinator Morgan Stanley, J.P. Morgan, MNC Securities

Use Of Proceeds 70% capex; 30% debt repayment, working capital

Domestic Underwriters Danareksa, MNC Securities

Lock Up 12 months on Company, 6 months on selling shareholder, 3 months of shares representing 5%

Transaction Highlights

Offering Size IDR2,174Bn / US$227MM

Implied Market Cap IDR10,713Bn / US$1,136MM (no greenshoe)

MNC Sky Vision US$227MM IDX IPO IPO Case Study

13

Bookbuilding in a Challenging Market Conditions

Source Capital IQ

85

90

95

100

105

1-May 16-May 31-May 22-Jun

JCI S&P 500 MSCI AxJ

-7% JCI -5% S&P 500

-10% MSCI AxJ

Start Book-Building Jun-18

Pricing Jun-22

Transaction was priced at IDR1,520 per share, implying a market capitalization of approximately US$1.1Bn MSky was valued at 15x FY2011 AV/EBITDA. Valuation

also represents a premium to regional and global pay TV operators on a forward AV/EBITDA basis

Volatile market conditions were

mitigated by a well-calibrated marketing strategy Significant orderbook buildup

on the first day from anchor investors enabled a books covered message to be communicated to the market, building momentum in the transaction

Roadshow was launched on the back of price insensitive shadow book

Deal was upsized on the back of strong demand from international accounts, increasing deal size from 16% to 20% of enlarged capital

Equity Capital Market Financing Alternatives

Follow-on Offerings: Block Trade Offering of primary /

secondary shares in an accelerated process, usually overnight

Distribution of shares through coordinated offering to institutional buyers

Advantages: speed of execution, minimize price risk and no marketing required

Disadvantages: this may not be price maximizing alternatives, as a block trade usually priced at discount

Bought Deal

Underwriters directly buy stock for overnight distribution

Overnight risk trade /capital commitment

Backstop Deal

Underwriters to provide a price range prior to launch, with an agreement to underwrite the shares at the wide end of the range

The profit arising from the difference of final clearing price and underwritten price will be shared

Overnight risk trade / capital commitment

Best Efforts Accelerated Bookbuild

Distribution of stock through organized offering to institutional and retail buyers

Orders are gathered in an overnight book building process post market close

14

Matahari Dept Store US$1.5Bn Re-IPO Re-IPO Case Study

15

Issuer PT Matahari Department Store Tbk (MDS)

Selling Shareholder Asia Color Company Ltd (CC) and PT Multipolar

Listing Venue Indonesia Stock Exchange (IDX)

Primary/Secondary 100% secondary

Pricing Date 25 March 2013

Free Float Post Deal 47.35% (post greenshoe)

Implied Market Cap IDR31,659Bn . US$3,257MM

Joint Global Coordinator Morgan Stanley, UBS, CIMB

Cornerstone Investors Commit 32% of base offer size: Blackrock, Fidelity, GIC, Schroders, Soros, Capital World, Azentus, EPF, MSIM, Hwang, Och-Ziff, T Rowe Price

Lock Up 12 months on Company, 6 months on Selling Shareholder, 3 months of shares representing 5%

Transaction Highlights

Offer Price (Price Range) IDR10,850 (IDR10,000 11,250)

Offering Size IDR14,406Bn / US$1,481MM

Matahari Department Store US$1.5Bn re-IPO Re-IPO Case Study

16

A landmark transaction in Asia and Indonesian capital markets

Largest IDX secondary selldown

Largest equity offering in Indonesia since 2008

Largest consumer/retail equity offering in SE Asia

Largest consumer/retail secondary equity offering in Asia ex-Japan

Largest department store equity offering since 2009

Transaction Highlights

Deal priced at IDR10,850, at the top half of the marketed range

Transaction was launched with 32% of the base transaction covered by marquee Tier-1 cornerstone investors, on the back of a successful cornerstone process

Bookrunners were able to guide investors to a valuation of 27x 2013E P/E, by highlighting MDS dominant market share, cash generation and earnings growth profile

Transaction was well oversubscribed, with c.74% allocated to long-only investors

Enhanced free float enables MDS to benefit from a special tax incentive for listed companies with a minimum 40% free-float, further enhancing MDS's earnings profile

Etisalat/XL Axiata US$510MM Block Trade Block Trade Case Study

17

Company PT XL Axiata Tbk (EXCL)

Vendor Etisalat International Indonesia

Discount Range 6% Discount to Close (IDR6,700); 4.1% Discount to 1 Day VWAP (IDR6,570); 0.7% Premium to 3 month VWAP

Market Cap US$6,014MM

Days of Trading 332 Days (Last 1 Month)

Pricing Date September 13, 2012

Price Range IDR6,100 - 6,300

Lock Up 90 Days

Joint Bookrunners Morgan Stanley, J.P. Morgan

Transaction Highlights

Total Offer Size IDR4,883Bn / US$510MM

Distribution Reg S / 144A

Third Largest Selldown Ever and Largest Telecommunication Selldown in Indonesia Since 1997

Etisalat/XL Axiata US$510MM Block Trade Block Trade Case Study

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0.0

5.0

10.0

15.0

20.0

3,600

4,500

5,400

6,300

7,200

1-Jan 20-Feb 9-Apr 28-May 16-Jul 13-Sep

Volume EXCL IDX

EXCLs Stock Price Performance Prior to Deal Against IDX; Rebased to EXCLs Share Price

IDR Shares (MM)

Source Bloomberg as of September 12, 2012

+9%

+48%

To mitigate against low liquidity of the

stock, a wall-crossing process was deployed prior to deal launch to engage key investors and in the process contributed to demand visibility in the market

Swift books covered message sent a strong signal to liquidity event specialists in the market, generating significant tailwind in orderbook momentum capable of covering the book by more than 1.5x

Deal was subsequently priced at the top of the marketed range (IDR6,300), at 6.0% discount to the close of the day (IDR6,700) representing a 2012E AV/EBITDA of 6.5x, a 12% premium to EXCLs closest comps (Indosat and Telkom)

Final orderbook was well oversubscribed by various bluechip institutions

Transaction was launched on the back of EXCLs share price closing at IDR6,700, within 7% of its all time high

Transaction represented 1 year worth of trading volume

Pros

Offers pre-emption rights to all

shareholders and protects them from dilution Allows existing shareholders to benefit from future upside

Rights can be traded (nil paid)

Generally underwritten prior to launch, creating certainty of proceeds

Could be used to raise a large amount of capital without advance shareholder approval

Cons

Significant dilution for

shareholders who do not take up rights, but no loss of value if they sell their rights

Current shareholders may not be willing or able to increase investment

May require a deep discount to current stock price (larger than in bookbuilding method), creating challenging optics Often seen as a last resort

Less of an opportunity to broaden the shareholder base

Rights offers are typically fully underwritten transactions through which an issuer can raise significant amount of proceeds from its existing shareholders Support from

existing shareholder(s) willing to take-up rights is critical

Excess shares not taken up through excess applications can be placed by underwriters to the public

Equity Capital Markets Financing Alternatives

Rights Offering

19

If shareholders are unable to exercise their right for legal/logistical reasons, they may be compensated by a cash payment equal to the difference between the net rump placement and underwriting price

Companies will issue rights to their existing shareholders upon record date

At that time, a fixed ratio of new shares that may be purchased per old share will be set

Existing shareholders will have the option to trade their rights during the subscription period or exercise the rights at the subscription price

Rights are valuable as they represent an economic interest to which investors are entitled. This right contains option value and can often be traded/transferred on the exchange where the common stock is listed

Existing Shareholders with Subscription Rights

Shareholders typically exercise their rights during the last few days of the subscription period for financing reasons and to ensure that the market price of the stock does not fall below subscription price

Equity Capital Markets Financing Alternatives

Mechanics of Rights Offering

Trade Rights

Exercise Rights

Do Nothing/Lapse Right

20

BNI US$1.2Bn Rights Issue Rights Offering Case Study

21

Issuer PT Bank Negara Indonesia Tbk (BNI)

Transaction Structure Rights Offering with RoI not exercising its Rights; then sells its rights to underwriters/new investors through a concurrent private placement

Market Cap IDR59Tn (US$6.6Bn)

Rights Price Range IDR2,300 IDR3,700

Offer Size IDR10.5Tn (US$1.171MM)

Offer Price IDR 3,100

Discount to Close 19.5%

P/Bv 2.18x

TERP IDR3,714

Discount to TERP 16.5%

Transaction Highlights

Rights Ratio 110,473 new shares for every 500,000 existing shares (1 for 4.5)

Size of Offering IDR10,461MM (US$1,171MM)

Lock Up BNI: 12 months, RoI: 6 months

Joint Bookrunners Morgan Stanley, Goldman Sachs, UBS, Credit Suisse, Macquarie, Bahana

IDR 3,400

11.7%

2.14x

IDR3,714

8.5%

IDR8,406MM (US$941MM)

Rights Offering Placement of Government Shares

Rights Offering Case Study

BNI US$1.2Bn Rights Issue

Unique structure with the RoI renouncing

its rights. The rights were excercised (by the local underwriter) and the underlying shares were sold to institutional investors via a bookbuild process

Significantly tighter discount to TERP compared to average Asian rights issues since 2009 (-25.8% discount to TERP for Asian precedents)

Tightest discount to TERP achieved for a Bank capital raising since the beginning of the financial crisis

Transaction Structure

Pre-offer, Republic of Indonesia (RoI)

was a 73.3% shareholder in BNI and has announced that it will not be taking up its rights shares

Brings the RoI stake to just under 60%, in line with the Governments long term target shareholding level

Increases the free float and liquidity of BNI

Makes BNI eligible to receive a 5% tax benefit, reserved for IDX listed issuers with a free float of over 40%

Equity Placement Mechanics

22

The Largest Indonesian Equity Offering since 2008 and The Largest Indonesian Financial Institution Equity Offering Ever

Pros Quick execution (Marketing

requires minimal management time)

Cheap debt (lower coupon / yield than straight debt)

Sale of equity at a premium / monetize future stock price growth

Substantial structural flexibility (currency, maturity, coupon, premium, issuer call, investor put and other innovative structural features)

Diversifies investor base No restrictive financial

covenants

Cons Potentially dilutive (although

less than straight equity Potential refinancing risk if

stock doesnt perform Prior to conversion, companys

debt increase

Debt security that is convertible into a fixed number of shares at the option of the holder Conversion price

determined at issue Lower coupon / yield

than straight debt due to the embedded conversion feature If conversion

occurs, sale of equity at a premium to todays price

If conversion does not occur, below market-rate debt financing

Equity Capital Markets Financing Alternatives

Convertible Bonds

23

Convertible Bond Issue

Features: Low yield debt

(subsidized through the sale of an equity option)

Sale of underlying shares at a premium and receipt of full proceeds at issue

Retention of voting rights and dividends in underlying shares until exchange

Credit spread of the Issuer but equity characteristics of the underlying stock are used

Significant structural flexibility maturity, put, call, premium, coupon and yield are all able to be adjusted to meet the specific requirements of the Issuer

A bond issued by Company A exchangeable into shares of Company B (usually a subsidiary or company in which the issuer owns a stake)

Exchanges into Shares of Company B

Converts into Shares of Company A

Company B

Owns Stake

Equity Capital Markets Financing Alternatives

Exchangeable Bonds

Company A

24

Common Uses of Proceeds General corporate

purposes

Refinancing maturing debt outstanding

Finance purchase price of acquisitions

Fund share repurchases / shareholder returns

Finance liability management opportunities (e.g. tendering for high-coupon debt outstanding)

Fund contributions to pension plans

Add leverage to support growth

Capital Structure Diagram

Tenor of Debt Securities

Senior Secured Debt

Senior Unsecured Debt

Subordinated Debt

Hybrids

Preferred Stock

Lowest Risk / Cost

Highest Risk / Cost

First Priority

Last Priority

< 9 mo. 3 - 7 Years 30 Years

Commercial Paper Medium-Term Notes

Senior Unsecured Subordinated Structured Retail Preferred Stock

Debt Capital Markets Financing Alternatives Capital Raising

25

Tower Bersama US$300MM High Yield Bonds High Yield Bonds Case Study

26

Issuer TBG Global Pte Ltd

Parent Guarantor PT Tower Bersama Infrastructure Tbk

Corporate Rating Ba2 Stable / BB Stable (Moodys / Fitch)

Format Reg S / 144 A

Issue Rating Ba3 / BB (Moodys / Fitch)

Type Senior Unsecured Notes

Offering Size US$300MM

Annual Coupon 4.625%

Joint Bookrunners Morgan Stanley, UBS

Yield 4.625%

Use of Proceeds Partial repayment of senior debt, repayment of existing List Co debt

Transaction Highlights

Maturity April 3, 2018 (5NC3)

Issue Price 100%

Orderbook was 13.7x oversubscribed at US$4.1Bn from more than 244 distinct investors. The 4.625% coupon is the lowest coupon ever achieved by an Indonesian high yield (non-SOE) corporate

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