Moody’s eyes Lippo Malls for trim

Moody’s Investors Service said it placed on review for downgrade the B1 corporate family rating of Lippo Malls Indonesia Retail Trust (LMIRT) and the B1 rating on the backed senior unsecured bond issued by LMIRT Capital Pte. Ltd., a wholly-owned subsidiary of LMIRT. The bond is guaranteed by the trustee of Lippo Malls.

Moody’s changed the outlook to under review from negative.

The review for downgrade follows LMIRT’s Monday announcement, in which it reported its updated plan to acquire Lippo Mall Puri from PT Mandiri Cipta Gemilang, a wholly owned subsidiary of Lippo Karawaci Tbk. (PT), Moody's said. Lippo Karawaci is also a sponsor of LMIRT.

LMIRT will pay S$400 million, of which S$280 million will be paid via a rights issuance fully underwritten by Lippo Karawaci and S$120 million will be funded via new bank loans. Lippo Karawaci will potentially provide a loan of up to S$40 million if the final bank loan is less than the proposed amount, Moody’s said.

“The review for downgrade reflects LMIRT’s increasing linkages with Lippo Karawaci, which has a weaker credit profile, in light of the planned acquisition – whereby Lippo Karawaci’s shareholding in LMIRT could increase significantly,” said Junling Tan, a Moody’s lead analyst for LMIRT, in a press release.

“In addition, the acquisition comes at a time when LMIRT is already facing heightened liquidity risk and a weak operating environment given coronavirus disruptions, signaling management’s growing appetite for risk.There is also the risk that the trust’s weakening earnings could lead to a breach of financial covenants in its bank loans in 2020, for which we expect it to obtain waivers from lenders,” Tan added.

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