Workers walk across a courtyard in the international municipal development project 'Meikarta' in Cikarang on July 2, 2018. (JG Photo/Yudhi Sukma Wijaya)
Lippo Karawaci Names John Riady as Chief Executive, Announces $1.1b Funding Plan
BY : JAKARTA GLOBE
MARCH 12, 2019
Jakarta. Lippo Karawaci, one of Indonesia's largest property developers controlled by the Riady family, announced a $1.1 billion funding plan and a management change in a statement on Tuesday (12/03) as the company embarked on a strategic transformation plan.
John Riady, the son of Lippo Group chairman James Riady, ascends as the company's chief executive with immediate effect to oversee Lippo Karawaci's new strategy to re-focus on "disciplined capital allocation across three core competencies: urban housing, lifestyle malls and healthcare," the company said.
Under the funding plan, Lippo Karawaci will conduct a rights issue to raise $730 million, and divest some of its assets for $280 million.
The Riady family, who is also the controlling shareholder of Lippo Karawaci, will act as a standby buyer in the rights issue through its wholly-owned subsidiary, Inti Anugerah Pratama. George Raymond Zage III, the founder and chief executive of Tiga Investments, and investment firm Chow Tai Fook Nominee have also committed to subscribe for the rights issue shares for a total of $70 million.
Lippo Karawaci said the rights issue plan is subject to approvals from the shareholders, who are scheduled for an annual general meeting on April 18, and the Financial Services Authority (OJK). The company expected to complete the funding by the end of June.
Lippo Karawaci has set the rights exercise price at Rp 235 per share, representing a discount of 8.2 percent to the last closing price of the company on March 11.
The company said it is still on course to sell its interests in healthcare joint ventures in Myanmar and in a mall in West Jakarta.
Lippo Karawaci eyes $20 million from selling a 40 percent stake in Yoma Siloam Hospital Pun Hlaing and a 35 percent stake in Pun Hlaing International Hospital to Singapore-listed sister company OUE Lippo Healthcare. The companies expect to complete the transactions by June.
Also, Lippo Karawaci agreed in March to sell the retail components of Lippo Mall Puri for 260 million to Lippo Malls Indonesia Retail Trust. The company expects to complete the transaction by the end of this year.
Debt, Liquidity, Investments
Lippo Karawaci plans to use the proceeds to repay debts, increase its liquidity buffer to cover all debt interests and real estate investment trust (REIT) rental obligations up to the end of 2020, and increase investments in existing key projects.
The company also announced on Tuesday a tender offer for an up to $150 million partial buyback of its outstanding $410 million 7 percent senior notes due in 2022, and $425m 6.75 percent senior notes due in 2026. Lippo Karawaci will also spend $125 million for the repayment of other existing indebtedness due within the next two years.
"Any balance of the amount earmarked for the partial bond buyback will be used for repayment of other existing indebtedness, and/or general corporate purposes. Collectively, these initiatives will improve LPKR’s debt maturity profile and near-term liquidity position," the company said.
Lippo Karawaci will also earmark $290 million from the proceeds to fund all debt interest payments and REIT income support that it is expected to incur through the end of next year.
"As part of the sale of Puri Mall, the company expects to incur transaction-related taxes and expenses and REIT rental obligations amounting to $60 million," it said.
Also, it is estimated to require another $60 million from Lippo Karawaci to participate in future equity fundraising by LMIRT associated with the acquisition of Puri Mall. Lippo Karawaci currently owns 30.7 percent of shares in the trust and is committed to maintaining it, the company said.
The liquidity buffer will also include $25 million in cash for working capital and general corporate purposes, the company said.
The remaining proceeds will go to some of the company's key projects.
"Over the next three years, Lippo Karawaci intends to invest up to $100m of the funding proceeds in the development of eight existing key projects currently under construction–Holland Village, Millennium Village, Monaco Bay Residences, St Moritz Makassar, Kemang Office, Embarcadero, Lippo Office Thamrin and Holland Village Manado," the company said.
That should be enough to cover more than a third of the projects' total costs of $275 million, Lippo Karawaci said. It expects to fund the remaining costs from account receivables to be received from units sold and future sales from completed projects and projects in construction.
Lastly, Lippo Karawaci will invest up to $200 million of the proceeds to develop Meikarta. Lippo Karawaci will subscribe to its pro-rata 54.4 percent rights entitlement in the project and act as standby buyer in a planned $200 million rights issue of Meikarta's other shareholder, Lippo Cikarang.
"The Meikarta project is expected to be the next breakthrough integrated development that will boast world-class infrastructure and facilities including shopping malls, international hospitals, universities, an international exhibition centre as well as a financial and technology hub," Lippo Karawaci said.
The company has revamped its management team with John Riady taking over from Ketut Budi Wijaya.
"I am honored to take on the role of chief executive of the company. I see great opportunities to build on what is today Indonesia’s leading integrated real estate developer, to drive operational excellence, focus and a more disciplined approach to capital allocation. I look forward to working closely with the new Board of Commissioners and the LPKR team to deliver greater value to our shareholders," John said.
The new management team comprises:
- John Riady as chief executive officer
- Surya Tatang as chief financial officer
- Peter Yu as director of projects, who will join the company on March 18
- Marshall Martinus will continue in his role as chief operating officer
- Bret Matthew Ginesky as head of investor relations of LPKR, who will join the company on March 25
The nominated board of commissioners, subject to shareholder approval on April 18, are:
- John Prasetio as independent president commissioner and head of audit committee
- Stephen Riady as commissioner
- George Raymond Zage III as commissioner
- Kin Chan as commissioner
- Anangga W. Roosdiono as an independent and head of nomination and remuneration committee