Fitch Ratings has downgraded Lippo Karawaci's long-term foreign and local currency issuer default ratings by two notches, and subsidiary Theta Capital's USD bonds to CCC+ from B, citing liquidity risks posed by the developer's $21 billion Meikarta megaproject in Cikarang, West Java. (Photo courtesy of Meikarta)
Lippo Karawaci Says Fitch Ratings Downgrade 'Unsubstantiated'
BY : SARAH YUNIARNI
NOVEMBER 09, 2018
Jakarta. Indonesian property developer Lippo Karawaci has lamented a recent credit downgrade by Fitch Ratings, saying it was on track to completing a Rp 6 trillion ($411 million) divestment plan set to ensure future growth and strengthen capital.
The global credit rating agency downgraded Lippo Karawaci's long-term foreign and local currency issuer default ratings by two notches, and subsidiary Theta Capital's USD bonds to CCC+ from B, citing liquidity risks posed by the developer's $21 billion Meikarta megaproject in Cikarang, West Java.
"We regret Fitch Ratings' decision to lower our credit ratings, as the decision was unsubstantiated. With the completion of the first phase of our larger divestment plan, we are now in a well-positioned stance, which shows from our cash flow and balance sheet, and we are on track for our next-stage growth," Lippo Karawaci said in a statement.
The developer acknowledged Fitch's concerns over its cash flow and liquidity risks, but said it had completed the divestment of assets in its two Singapore-based affiliates, which saw it raising about Rp 2.17 trillion in cash.
The company also expects to raise more than Rp 6 trillion from the upcoming sale of Lippo Mall Puri in West Jakarta; divestment of its remaining stake in First REIT (a Singaporean health care real estate investment trust); and the sale of its stake in a hospital in Myanmar.
Lippo Karawaci said its $75 million unsecured bond will be due by June 2020, followed by a $410 million bond that will mature in 2022 and a remaining $425 million bond that will mature in 2026.
These corporate actions will strengthen the company's balance sheet and improve its debt maturity profile.
"It will give Rp 14 trillion in debt versus Rp 53 trillion in assets at acquisition value, and 20 percent to 30 percent higher if revalued to reflect current market prices," the company said in the statement.
Lippo Karawaci said Meikarta, with its unrivaled design and cost structure, would see the company selling it at a lower price, which would allow for the development of other megaprojects.
The developer also applauded the government's efforts to build a million homes, which it said would be an opportunity for the country's property sector.
The Jakarta Globe is affiliated with the Lippo Group.