Moody’s pares Theta notes to Caa1

Moody’s Investors Service said it downgraded the backed senior unsecured rating on the notes issued by Theta Capital Pte. Ltd., a wholly-owned subsidiary of Lippo Karawaci Tbk., to Caa1 from B3. Lippo Karawaci and some of its subsidiaries guarantee the notes. The agency also affirmed Lippo Karawaci's B3 corporate family rating.

The downgrade follows Lippo upsizing its tender exercise on Wednesday. It had accepted valid tenders of $37 million and $113.9 million in notional amounts of its 2025 and 2026 dollar-denominated notes, respectively, following the expiration of the tender offer exercise.

"The downgrade of the bond ratings to Caa1 reflects legal subordination risk given that secured debt will now account for the majority of the company's borrowings," said Rachel Chua, a Moody's vice president and senior analyst, in a press release.

"Given the more attractive onshore bank lending rates, it is likely that Indonesian companies including Lippo Karawaci will have a growing reliance on Indonesian bank loans which typically require security. As such, we expect Lippo Karawaci's secured borrowings will likely increase over time," added Chua, who is also the lead analyst for Lippo Karawaci.

The tender offer will be mostly funded through a new secured seven-year term loan that Lippo Karawaci secured from Bank Negara Indonesia (Persero) Tbk. and PT Bank CIMB Niaga Tbk., the agency said.

The outlook is stable.

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