Fitch rates Lippo Karawaci notes B-

Fitch Ratings said it assigned a rating of B- with a recovery rating of RR4 to PT Lippo Karawaci Tbk.’s proposed dollar-denominated senior notes. The notes will be issued by Lippo’s wholly owned subsidiary, Theta Capital Pte. Ltd., and guaranteed by Lippo and several subsidiaries.

The proposed notes are rated at the same level as Lippo’s issuer default rating as they represent unconditional obligations of the company, and the RR4 recovery rating implies a zero-notch uplift from the IDR for a B- instrument rating, the agency said.

Proceeds will be used to redeem Lippo’s $409.3 million 7% senior notes due 2022 and for associated refinancing costs.

“We expect Lippo’s cash flow from operations (CFFO) to remain negative at least until end-2020, as the company could face challenges in sustainably improving pre-sales in the next two years, limiting upward rating action. Key challenges include regaining buyer confidence and securing significant advance payments from customers to fund construction costs due to a number of failed projects and delayed deliveries over several years,” said Fitch in a press release.

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