S&P gives Lippo Karawaci notes B-

S&P said it assigned its B- long-term issue rating to a proposed issuance of senior unsecured notes by PT Lippo Karawaci Tbk. under its special purpose vehicle, Theta Capital Pte. Ltd. Lippo will guarantee the proposed notes.

“We equate the issue rating on Lippo’s proposed notes with our B- issuer credit rating on the company. This is because all of the company’s assets are located in Indonesia, a jurisdiction where we believe the priority of claims in a theoretical bankruptcy is highly uncertain due to the weak jurisdictional context,” said S&P in a press release.

The offering will extend Lippo’s debt maturity profile. The company will use most of the proceeds to partially refinance $409.3 million notes due in 2022.

The rating on Lippo reflects the company’s high leverage and sizable negative discretionary cash flows. This has resulted in steady erosion of liquidity since the July 2019 rights issue. “Based on current cash sources, we project Lippo will have sufficient liquidity at least until June 2021, contingent upon successful completion of the Puri mall sale in 2020,” S&P said.

The outlook is negative.

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