Fitch downgrades LMIRT’s rating again as refinancing worries deepen

FITCH Ratings downgraded Lippo Malls Indonesia Retail Trust’s (LMIRT) issuer default rating to “CCC” from “CCC+”, nearly three weeks after a previous downgrade from “B-”, as it continues to worry over refinancing risks.

In a note on Wednesday (Mar 8), Fitch said its latest rating action reflects the increased likelihood that LMIRT would be unable to refinance its S$547 million debt maturing over the next 18 months.

This came after LMIRT’s manager said on Monday that it appointed Stirling Coleman Capital as its financial adviser to explore options and measures to maintain a sustainable capital structure and reduce leverage.

Fitch viewed the move as indicative of an increased risk of debt restructuring if LMIRT is unable to obtain sufficient bank debt to refinance its term loans and US-dollar notes.

It believes the trust could pursue a debt restructuring if it fails to transition to a secured-capital structure. This may include an extension in the maturity of its US$250 million notes due June 2024.

Fitch expects LMIRT to utilise its portfolio of unpledged shopping malls to raise secured bank debt. Execution, however, is another matter, due to covenants in the 2024 and 2026 unsecured notes that limit the trust’s ability to raise prior-ranking debt.

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Although LMIRT does not need bondholders to waive this covenant to refinance its bank loans due November 2023 and January 2024, it requires bondholder consent to raise secured debt to refinance its medium-term notes due June 2024.

Furthermore, Fitch believes LMIRT’s internal liquidity is insufficient to meet significant upcoming debt maturities.

The credit ratings agency also downgraded LMIRT’s senior unsecured notes due 2024 and 2026 to “CCC” from “CCC+”, with a recovery rating of “RR4”. These notes are issued by wholly-owned subsidiary LMIRT Capital, and are guaranteed by Perpetual (Asia) in its capacity as LMIRT’s trustee. Its outlook on all ratings remains negative.

LMIRT : D5IU 0% closed flat at S$0.026 on Thursday.