Fitch upgrades LMIRT issuer default rating to ‘CC’ from ‘RD’ on potential debt restructuring
Mia Pei
FITCH Ratings has upgraded Lippo Malls Indonesia Retail Trust’s (LMIRT) long-term issuer default rating to “CC” from “RD”, after downgrading it to “RD” from “C” following the completion of a tender offer.
The “CC” rating, indicating high levels of credit risk, is to reflect the increasing likelihood of a debt restructuring, given the low take-up rate of the tender offer, said Fitch in a report on Friday (Jan 5).
It also shows that Fitch expects the Singapore-listed trust to be unlikely to raise sufficient funding to repay the remaining US$188.3 million of unsecured notes maturing on Jun 19, 2024, at par value.
Fitch added that the previous downgrade to “RD”, or restricted default, was because the tender offer was seen as a distress debt exchange, as it results in a material reduction in terms and was conducted to avoid a default.
Fitch has also upgraded the rating on LMIRT’s senior unsecured notes due 2024 and 2026 to “CC”, from “C”, with a recovery rating of “RR4”, indicating average recovery prospects given default.
The “RR4” rated securities have characteristics consistent with securities historically recovering 31 to 50 per cent of current principal and related interest, according to Fitch.
Fitch highlighted LMIRT’s liquidity concerns, led by the high execution risks around its ability to pledge some of its unencumbered assets, and dispose of non-core assets in the near term, in addition to its insufficient cash balance of S$99 million as at the end of September last year.
After the market closed on Thursday, LMIRT’s manager noted that the trust’s aggregate leverage ratio is likely to have risen to 44.3 per cent for the fourth quarter of 2023, from 43 per cent in the previous quarter, primarily driven by a 7.7 per cent decline in the trust’s investment properties’ value.
The manager also noted that the trust’s debt obligations fell by around S$19.5 million after the completion of the tender offers in December last year.
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