S&P rates Lippo Karawaci notes B+

Standard & Poor's said it assigned a B+ corporate credit rating to Indonesia-based PT Lippo Karawaci Tbk and a preliminary B+ rating to the proposed five-year $180 million unsecured notes due 2011 to be issued by subsidiary Lippo Karawaci Finance BV. The outlook is stable.

About $150 million of the issue proceeds will be used to refinance bank debts, with the remainder going toward general corporate purposes including land acquisitions and project development.

S&P said the rating on Lippo Karawaci reflects its leading position in the domestic property development market, favorable cost position with a large and low-cost land bank and its exposure to the health care, hospitality and infrastructure sectors, which provide recurring income that accounts for some 40% of revenue.

Nevertheless, the rating is constrained by the company's aggressive financial profile, substantive intercompany transactions, cash flow volatility due to exposure to the cyclical property development market, vulnerability to a liquidity crunch and the risk of further rupiah depreciation and exposure to operating risk, the agency said.

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