Lippo Karawaci's Private Placement Will Boost Liquidity, Reduce Refinancing Risk: Moody's

LMIRT Management, the manager of Lippo Malls Indonesia Retail Trust, announced that Chan Lie Leng will be retiring from her position as chief executive to pursue personal and family interests. (B1 Photo)

By : Sarah Yuniarni | on 6:07 PM June 08, 2018
Category : Business, Corporate News

Jakarta. The private placement by Lippo Karawaci, one of Indonesia's largest property developers, will improve liquidity and reduce the company's refinancing risk, global credit rating agency Moody's Investors Service said in a statement on Thursday (07/06).

Lippo Karawaci raised $75 million (Rp1.04 trillion) in a private bond placement through a wholly owned subsidiary, Singapore-based Theta Capital, on Tuesday.

Deutsche Bank was hired to arrange the transaction.

Lippo Karawaci will use the proceeds to repay $52 million in outstanding debt, which will mature on April 30 next year. The remaining proceeds will be used for general corporate purposes.

The two-year bonds have a coupon rate of 9.62 percent, higher than the 7.0 percent to 7.5 percent on the credit facility the company will repay. That means the higher coupon rate lowers the interest coverage ratio to 1.6 times, compared with Moody's February 2018 estimation of 1.7 times.

Moody's also estimated that proceeds from the bonds sale would only cover half of the company's funding gap – the amount needed to cover ongoing operations – for this year. However, the agency suggested that the company address liquidity pressures for next year by starting to sell its assets.

Lippo Karawaci plans to sell one of its malls to Lippo Malls Indonesia Retail Trust (LMIRT), a Singapore-listed real estate investment trust. LMIRT invests in real estate in Indonesia, primarily retail and retail-related.

Lippo Karawaci is currently still waiting for approval by Singapore's financial authority before executing the plan, Lippo Karawaci president director Ketut Budi Wijaya said on Tuesday, as quoted by Investor Daily.

"We are still estimating the value of the asset, that is why we have yet to disclose the value. Nevertheless, we are certain that the sale of our asset can contribute significantly to Lippo Karawaci," Ketut said, adding that the sale will be completed by the fourth quarter of this year.

Aside from debt reduction, Ketut said the proceeds from the transaction will also be used to fund the company's business expansion.

Last year, Lippo Karawaci sold Lippo Plaza Jogja in Yogyakarta to Singapore-based Real Estate Investment Trust, better known as First REIT.

The Jakarta Globe is affiliated with the Lippo Group.

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