Moody's may downgrade Lippo Karawaci

Moody's Investors Service said it placed Indonesia-based PT Lippo Karawaci Tbk.'s B1 local-currency corporate family rating and the B2 foreign currency senior unsecured bond rating of Lippo Karawaci Finance BV and guaranteed by Lippo Karawaci under review for possible downgrade.

The review follows the company's announcement that it has won a bid to acquire 1.4 hectares of land in Singapore's central business district for around Rp 2 trillion.

The agency said the acquisition is outside its expectation and is considered aggressive relative to Lippo Karawaci's size of operations and its total assets of around Rp 6.2 trillion. Moody's predicted Lippo Karawaci's financial profile may weaken materially and ratings pressure may emerge, given that part of the acquisition is likely to be debt-funded. Furthermore, the Singapore market is new to Lippo Karawaci and the company does not have any track record in operating in this competitive market.

Partly mitigating the risks is the fact that the Singapore market is more stable relative to the Indonesian market and the acquisition could lead to benefits in terms of diversification, the agency said.

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