Corporate Debt Restructuring Masterclass

18 July 2022 (Mon), 5pm Singapore/HK time

Rating agency Fitch revised Indonesian homebuilder Lippo Karawaci to stable while keeping its B- rating. The stable outlook was based on expectations that Lippo will maintain sufficient liquidity at a standalone level, excluding key listed subsidiaries, PT Lippo Cikarang Tbk and PT Siloam International Hospitals Tbk, but including other business units, to meet its obligations through end-2022. They did note that a key risk was that Lippo may need to resort to further asset sales to boost liquidity beyond 2022. Fitch notes improving presales and the company’s flexible product mix as a positive. Besides they expect Lippo’s free cash flow gap to improve to around -10% of gross debt in 2021-22 vs -20% expected at end-2020. Fitch also mentioned that the sale of Lippo Mall Puri on 27 January 2021 to Lippo Malls Indonesia Retail Trust (LMIRT) for IDR 625 billion ($44mn) will boost liquidity and should allow Lippo to maintain a positive cash balance at a standalone level through end-2022. Lippo’s rent support payments are also expected to fall 20% in 2021-22 from 2019 levels driven by Lippo’s negotiations with First REIT. Overall sector outlook has also improved with healthy demand for affordable landed homes and a recovering economy. Fitch forecasts GDP at 6.6% in 2021 and stated that it should boost demand for affordable homes.

Meanwhile, LMIRT has hired bankers for a potential 5Y dollar bond sale. LMIRT Capital will issue the proposed notes with a guarantee from Perpetual (Asia) Limited in its capacity as trustee of Lippo Malls Indonesia Retail Trust. The offering comes after the company recently announced it will resume coupon payments on its SGD perps. LMIRT’s USD 7.25% 2024s were down 0.2 to 100.88, yielding 6.95%.

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