FITCH Ratings has downgraded Lippo Malls Indonesia Retail Trust’s (LMIRT) long-term issuer default rating to “C” from “CCC-”.

The move comes after the trust announced on Dec 27 that a tender offer for its senior unsecured notes due 2024 and 2026 would proceed after receiving the relevant requisite consents.

Fitch, in a report dated Dec 29, believes such a tender offer constitutes a distressed debt exchange as it will lead to a material reduction in the original terms of the notes. Furthermore, the tender offer is being conducted to avoid a traditional default.

It previously warned of a downgrade on Dec 14 after placing the Indonesia-focused real estate investment trust on its “rating watch negative” list.

Based on Fitch’s ratings scales, a lower “C” rating points to a near default – where a default, or default-like process, has begun.

LMIRT’s manager on Tuesday (Jan 2) highlighted in a bourse filing that the trust remains in compliance with its financial covenants.

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On Dec 11, LMIRT launched tender offers related to its outstanding 7.25 per cent senior notes due 2024, and 7.5 per cent senior notes due 2026. The trust proposed to repurchase its 2024 notes at US$765 per US$1,000, and the 2026 notes at US$665 per US$1,000 via a fixed-price offer.

It also launched consent solicitation exercises related to proposed amendments to indentures of the notes, which prevent LMIRT from pledging its assets as security for debt financing.

LMIRT’s counter closed on Friday 6.3 per cent or S$0.001 higher at S$0.017.