Fitch places Lippo Malls on watch

Fitch Ratings said it placed Lippo Malls Indonesia Retail Trust's (LMIRT) long-term issuer default rating of CCC- on rating watch negative. The agency also placed the CCC- and RR4 recovery ratings on the senior unsecured notes due 2024 and 2026 issued by LMIRT's wholly owned subsidiary, LMIRT Capital Pte. Ltd., on RWN.

LIMRT announced tender offers for its 2024 and 2026 notes. It is also seeking consents to amend the notes’ indentures. The company is offering to repurchase the 2024 notes at $765 per $1,000 and the 2026 notes at $665 per $1,000 via a fixed-price offer. LMIRT plans to use a secured Rp 2.5 trillion amortizing loan to fund the offer.

“The RWN reflects Fitch's view that LMIRT's proposed tender offer and concurrent consent solicitation constitutes a distressed debt exchange (DDE). This is because the transaction will lead to a material reduction in terms for existing unsecured noteholders, and we believe it will help the company avoid a default on its US dollar notes, given LMIRT's untenable liquidity profile,” the agency said in a press release.

Fitch said it will probably downgrade LMIRT to C if the consent solicitation to amend material covenants succeeds and if investors accept the offer. The RWN reflects the risk that most of the noteholders may not accept the proposed amendments.

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