Fitch affirms Lippo Karawaci

Fitch Ratings said it affirmed PT Lippo Karawaci Tbk.'s foreign-currency and local-currency issuer default ratings at B+ and national long-term rating at BBB+(idn), along with the long-term rating of B+ and recovery rating of 4 on the $250 million senior unsecured notes due 2011 issued by Lippo Karawaci Finance BV and guaranteed by Lippo Karawaci.

The outlook is stable.

The ratings are affirmed even though the market for the development and sale of strata-titled malls, hitherto Lippo Karawaci's main cashflow generator, deteriorated in 2006, Fitch said. The company responded to the change in market dynamics by changing its focus to mixed-use developments, which typically consist of apartments, retail malls, hotels, office towers and hospitals.

Fitch said it believes this approach will improve the quality and quantity of the company's recurring cashflows and reduce its long term business risks.

However, in the short term it will need to fund the development of the investment properties, which will strain its cashflows and liquidity, the agency added.

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