Lippo Malls Indonesia Retail Trust (LMIRT) will not be redeeming its outstanding S$140mn ($102.9mn) 7% Perp on the first call date of September 27, as per IFR. The coupon will reset to the prevailing 5Y Singapore dollar SOR + initial spread of 524.5bp. Based on current SOR levels, the coupon will reset to ~6.18%. The decision to skip the call on its subordinated debt (Term of the Day, explained below) does not breach any covenants, but was not unexpected as it would have to pay a much higher yield on a new Perp – its 7% Perp currently yields 7.4%, trading at 82.5 and hence, not calling the bond and not issuing new debt to refinance would translate to a saving of around 122bp.
LMIRT said it decided not to redeem the perpetual notes after considering its long-term interests of preserving cashflow and liquidity, and the current macroeconomic environment. IFR notes that taking new debt to redeem the 7% Perp would only increase its leverage and lessen available headroom to take on debt for future acquisitions and projects. The update comes after First REIT decided to not redeem its S$60mn 5.68% Perp on the first call date of July 8, 2021, after which the coupon reset to 4.9817%. As per IFR, the focus is now on Soilbuild Business Space REIT, which has an S$65mn 6% Perp callable on September 27 and Mapletree Logistics Trust’s S$250mn 4.18% Perp callable on November 25.