Lippo Malls Indonesia Retail Trust rated Ba3 by Moody's, BB (EXP) by Fitch

MAINBOARD-LISTED Lippo Malls Indonesia Retail Trust (LMIRT) has been assigned a corporate family rating of "Ba3" by Moody's Investors Service, and an expected long-term issuer default rating of "BB (EXP)" by Fitch Ratings Singapore.

Both agencies gave a stable outlook, the Singapore-based real estate investment trust's (Reit) manager said in a bourse filing on Monday.

Moody's also assigned a Ba3 backed senior unsecured rating to the bond issued by LMIRT Capital, a wholly owned subsidiary of the Reit. The bond is guaranteed by the trustee of LMIRT.

LMIRT has a portfolio of 30 income-producing retail assets in Indonesia - comprising 23 malls and seven retail spaces in other malls.

As at March 31, it had a weighted average debt maturity of two years, with S$370 million of debt maturing in 2019 and 2020. After the proposed US-dollar bond, the trust's pro-forma weighted average debt maturity will improve to around 4.3 years. The weighted average debt maturity does not consider its two perpetual securities - S$140 million callable in 2021 and S$120 million callable in 2022.

LMIRT's gearing stood at 33.9 per cent as at March 31, with 58.1 per cent of debt on a fixed-rate basis to mitigate fluctuating interest rates. All of its debt is also unsecured.

Moody's said the Reit generates a predictable income stream from its asset portfolio, with healthy occupancy rates, well-balanced lease expiry profiles and favourable lease payment structures.

"The Ba3 corporate family rating incorporates our expectation that LMIRT's refinancing risk over the next 12-18 months will be adequately addressed by the trust's proposed US-dollar bond issuance," said Jacintha Poh, vice-president and senior credit officer at Moody's.

As a Reit, LMIRT distributes the majority of its cash flows and does not retain cash to repay debt, exposing the trust to inherent refinancing risk and resulting in weak liquidity, Moody's noted. Nonetheless, these risks are partially mitigated by the trust's track record of access to funding, it added.

Moody's also expects a reduction in LMIRT's revenue exposure to the Lippo group of companies to below 25 per cent, even after its proposed acquisition of Lippo Mall Puri which is scheduled to complete in the second half of 2019, said Ms Poh, who is also Moody's lead analyst for LMIRT.

James Liew, chief executive officer of the Reit's manager, said: "With these ratings, we hope to diversify our financing tools to better manage our capital structure and the overall efficiency of our funding resources."

LMIRT units were trading up 0.5 Singapore cent or 2.381 per cent at S$0.215 as at 2.59pm on Monday.