Moody's confirms LMIRT's B1 rating following review for downgrade

MOODY'S Investors Service has confirmed the B1 corporate family rating of Lippo Malls Indonesia Retail Trust (LMIRT), it said on Thursday.

This follows the Indonesian retail real estate investment trust's (Reit) announcement of its finalised funding structure and rights issuance results for its planned Lippo Mall Puri acquisition.

The credit rating agency has also confirmed the B1 rating on the backed senior unsecured bond issued by LMIRT Capital, a wholly-owned subsidiary of LMIRT.

Moody's changed its outlook on all the ratings to negative, from rating under review. Prior to the review, the outlook was negative.

It placed the Reit and the LMIRT Capital bond on review for downgrade in September last year. The review focused on three areas, including the funding structure of the Reit's proposed acquisition of Lippo Mall Puri from Mandiri Cipta Gemilang, which is wholly owned by LMIRT's sponsor, Lippo Karawaci.

Moody's analyst Tan Junling said the ratings confirmation reflects LMIRT's improvement in liquidity following the waivers of financial covenants in its bank loans and its new US$75 million committed credit facility to address its S$175 million syndicated term loan maturing in August 2021.

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The B1 rating incorporates Moody's expectation that LMIRT will improve the maturity profile of its debt over the next few months.

The rating also includes the Reit's degree of independence as a publicly listed and regulated trust in Singapore (Aaa stable) despite becoming a subsidiary of its sponsor, Lippo Karawaci (B3 stable) following the rights issuance, the analyst said.

"However, given the linkages between LMIRT and Lippo Karawaci, LMIRT's rating will remain constrained at no more than two notches above that of Lippo Karawaci," Ms Tan added.

Meanwhile, the negative outlook reflects uncertainty over the extent of impact Covid-19-related disruptions have on the earnings and performance of LMIRT properties.

The analyst said a delay in operating environment recovery leading to weaker performance of LMIRT's properties, may result in a breach in financial covenants under the trust's bank loans from the fourth quarter of 2021 onwards. This will weaken the Reit's liquidity profile.

Units of LMIRT were trading flat at 6.6 Singapore cents as at 11.45am on Friday.