Lippo Malls Indonesia Retail Trust (LMIRT) was downgraded to CCC- from CCC by Fitch. This was on the back of material delays in the refinancing of LMIRT’s term loans due November 2023 and January 2024. The amounts due on these loans are S$135mn and S$83mn respectively. As per Fitch, this has increased the risk that “arms-length financing may not be available to repay debt”. Besides, they also highlighted that the risk may feed into its dollar bonds due 2024 and 2026. Fitch expects LMIRT to use its portfolio of unpledged shopping malls to raise secured bank debt to refinance upcoming debt maturities. But the covenants on its 2024s and 2026s limit its ability to raise secured debt. In this case, LMIRT may have to resort to a debt restructuring that may include a maturity extension on the notes. LMIRT’s liquidity is not sufficient to meet its bonds due of ~S$547mn in the next 18 months, after it reported having cash  balances of S$111mn at end-2022. Also, its interest coverage ratio is below the 2.5x threshold. Besides, forex risk given that it earns only in rupiah and a leverage ratio of 44.6% also limit its financial profile.

LMIRT’s dollar bonds due 2024 and 2026 are trading at 61 and 66 cents on the dollar respectively.

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