Lippo Malls Indonesia Retail Trust (LMIRT) has been downgraded to B+ from BB- with a negative outlook by Fitch Ratings as the LMIRT malls across Java, Bali and Medan have been forced to shut temporarily due to Covid-19 restrictions. Along with the Issuer Default Rating (IDR) of LMIRT, the senior unsecured bonds due 2024 and 2026 issued by its subsidiary LMIRT Capital Pte Ltd have also been downgraded to B+ with a recovery rating of RR4. The second wave of the pandemic has derailed the recovery and is likely to reduce the Fund Flow from Operations (FFO) fixed charge below 1.3x, the minimum requirement for a BB- rating. The rating agency said, “We estimate that LMIRT’s FFO fixed charge should be sufficient for a ‘B+’ rating, as its malls are in partial operation, its service charges, two master leases and guaranteed net property income (NPI) from Lippo Mall Puri. However, there is a lack of substantial headroom, especially against the risk of prolonged restrictions and an economic downturn.” LMIRT’s revenues and net NPI had increased by 30% and 90% respectively in 4Q20 before the lockdown and were in line with expectations. Lippo Karawaci TBK rated B-/stable is the majority unitholder of LMIRT. However, since LMIRT holds a right of first refusal over Lippo’s malls, it is rated on a standalone basis. The trust has adequate liquidity with a cash balance of S$155mn ($114.5mn) as of June 2021 to cover its upcoming term loan of S$67.5mn ($50mn) due in November 2022. As per Fitch, its S$140mn ($103mn) perps callable in September 2021, are unlikely to be called. The 7% perps are currently trading at 82.5 cents on the dollar.