Fitch Ratings cuts LMIRT outlook to negative due to coronavirus impact

FITCH Ratings has lowered its outlook on Lippo Malls Indonesia Retail Trust's (LMIRT) long-term foreign-currency issuer default rating to negative from stable due to the coronavirus outbreak.

The negative outlook is based on an expectation the pandemic will impact operating earnings, with average occupancy rate dropping to around 50 per cent in 2020, Fitch Ratings said on Monday.

It also affirmed the mainboard-listed retail real estate investment trust's long-term senior unsecured rating at BB.

"LMIRT has headroom for coverage to weaken without significantly exceeding the negative rating sensitivity for a prolonged period," Fitch Ratings said, adding that the temporary closures of LMIRT's shopping malls and retail spaces will lead to an estimated 50 per cent decline in revenue and 60 per cent drop in Ebita (earnings before interest, taxes and amortisation) for 2020.

This is compared with about 20 per cent revenue growth and 5 per cent Ebita growth in 2019.

Fitch Ratings said this scenario assumes the pandemic will persist in the second quarter of 2020 followed by a slow recovery.

Meanwhile, it said LMIRT's cash flow would be further pressured by depreciation of the Indonesian rupiah, something Moody's Investors Service also noted when it similarly downgraded its outlook on LMIRT to negative from stable.

Liquidity-wise, Fitch Ratings said LMIRT's end-2019 cash balance of S$110 million was enough to cover S$75 million worth of bonds maturing in June 2020.

It also expects LMIRT to defer interest payments on its perpetual securities and dividend distribution to conserve cash.

"LMIRT's next significant maturities are S$175 million term loans due in August 2021, which provides the company with sufficient time to refinance by loans or bonds once the market improves," Fitch Ratings added.

Units of LMIRT were up 0.1 Singapore cent or 1 per cent at 10.6 cents as at 10.39am on Tuesday.