Central Bank of Myanmar updates and clarifies criteria for offshore loans

22
Jan
2020

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The Central Bank of Myanmar (“CBM”) has recently made changes to the offshore loan criteria that it has published on its website (see https://www.cbm.gov.mm/content/2066). Clearer wording has been added in terms of the differences in requirements for companies holding permits from the Myanmar Investment Commission (“MIC”) and non-MIC companies. Further updates have been made to terms used to bring them in line with the new Myanmar Companies Law 2017.

A substantial change (compared to the previously published version of the criteria) is the lowering of the minimum threshold for equity capital for non-MIC companies (those registered by the Directorate of Investment and Company Administration (“DICA”)) from US$500,000 to US$50,000. Now the US$500,000 threshold applies only to MIC companies.

The other noteworthy change is the clarification of the wording regarding the maximum debt-to-equity ratio, which previously stated that it was “either 3:1 or 4:1”. The new wording states that the ratio is 4:1 for MIC companies, and 3:1 for non-MIC companies.

Recap of requirements for CBM approval of offshore loans

Below is a quick summary of the latest version of the offshore loan criteria. The Central Bank would consider the following major financial parameters of the proposed transaction when considering the application:

  • Whether or not the borrower’s equity capital exceeds US$500,000 for an MIC company or US$50,000 for a DICA-registered company.
  • Whether or not the borrower has already transferred 80% of the equity committed in the MIC permit.
  • Whether or not the debt-to-equity ratio is within a maximum of 4:1 for an MIC company or 3:1 for a DICA- registered company.

For the full list of the criteria, please refer to the Central Bank’s web-page.

AUTHOR
Nainjyot GandhiNainjyot Kaur Gandhi
Legal Associate
VDB Loi, Myanmar

Nainjyot Gandhi is a legal advisor and assist clients in the corporate M&A, banking and finance, and TMT sector. She advises international financial institutions, commercial lenders, corporate borrowers and state-owned banks. She also focuses on micro financing and business combinations in Myanmar.

CONTACT
Maxim KobzevMaxim Kobzev
Senior Counsel
VDB Loi, Myanmar

Maxim is counsel with VDB Loi finance team. His practice focuses on cross-border and local project financings, corporate loans, pre-export facilities and restructurings. Maxim advises both borrowers and lenders, commercial banks, corporations and development institutions with particular focus on complex projects in the banking, infrastructure, oil & gas, mining and metals and manufacturing sectors and transactions in the emerging markets.

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