Workers descend from a crane at the international municipal development project Meikarta. (JG Photo/Yudhi Sukma Wijaya)

S&P Upgrades Lippo Karawaci's Debt Rating After Successful $787m Rights Issue

JULY 19, 2019

Jakarta. Global rating agency Standard & Poor's Financial Services has lifted the debt rating of Lippo Karawaci, one of Indonesia's largest property companies, after a successful rights issue ensures improvement in its liquidity, the company said in a statement on Friday. 

S&P raised Lippo Karawaci's long-term issuer credit rating to B- from CCC+ with a stable outlook, while also removing the company from its CreditWatch, a sure sign that the rating is unlikely to change in the short term. S&P also raised the company's outstanding guaranteed senior unsecured notes rating to B-.

"The upgrade is an affirmation of the substantial improvement in Lippo Karawaci's liquidity position ever since we embarked on our strategic transformation plan," John Riady, Lippo Karawaci's chief executive officer, said in a statement on Friday. 

"We believe Lippo Karawaci is on the right track, and will not rest on our laurels. The management team and I are focused on achieving our operational targets by delivering our existing key projects and launching new residential developments while ensuring prudent capital spending and stable cash flow," John said. 

The stable outlook from S&P rests on expectation Lippo Karawaci will have enough cash in the next 12-18 months, the company said in a statement. 

Lippo Karawaci raised $787.5 million from selling new shares early this week. It is also undertaking asset sales — including the retail components of Lippo Mall Puri by the fourth quarter this year — which would bring in an additional $200 million in cash. 

The company's successful financial restructuring has prompted analysts to offer a rosy view of the company. 

"We reiterate buy on [Lippo Karawaci] with a 45 percent upside to our target price, driven by [the company's] management's restructuring program that will lift uncertainty over its liquidity outlook and unlock the value of its many stalled property developments," securities firm Maybank Kim Eng wrote in a recent research note. 

According to the firm, Lippo Karawaci's shares could trade at Rp 400 apiece in 12 months' time. The shares opened at Rp 282 apiece at the Indonesia Stock Exchange on Friday, up 1.4 percent from its closing price a day earlier. The shares have already risen 40 percent since the beginning of this year, ending a two-year decline. 

Maybank Kim Eng said Lippo Karawaci plans to launch 3,000 landed houses development through its subsidiary Lippo Cikarang in the second half of this year. 

"We are upbeat on the launch of this project, which targets the low to middle-end segment with a starting price per unit of Rp 600 million ($43,000)," Maybank Kim Eng said. 

The Jakarta Globe and Lippo Karawaci are both affiliated with the Lippo Group.