LIPPO Malls Indonesia Retail Trust (LMIRT) : D5IU -8.82% reported on Monday (Feb 13) that its distributions may be negatively affected by Moody&rsquo s Investors Service&rsquo s recent downgrade of the trust&rsquo s corporate family rating as well as its bonds.

 

To recap, the credit rating agency on Friday announced it had downgraded LMIRT&rsquo s corporate family rating from B3 to Caa1. 

 

The backed senior unsecured rating for bonds issued by LMIRT&rsquo s wholly-owned subsidiary, LMIRT Capital, was also downgraded from B3 to Caa1. The bonds are guaranteed by the trustee of LMIRT.

 

Moody&rsquo s outlook on all its ratings remains negative. 

 

In response, the trust&rsquo s manager said LMIRT continues to explore options and measures to maintain a sustainable capital structure and to reduce the aggregate leverage of the trust.

 

These measures &ndash on top of the downgrade of credit rating by Moody&rsquo s &ndash could negatively affect the trust&rsquo s distributions to holders of its units and perpetual securities, said the manager. 

 

It also highlighted that LMIRT remains in compliance with its financial covenants and the aggregate leverage limit as prescribed under the property funds appendix.

 

Moody&rsquo s vice president and senior analyst Rachel Chua said the agency&rsquo s downgrade is reflective of the trust&rsquo s &ldquo unsustainable capital structure and weak financial management&rdquo . 

 

&ldquo LMIRT&rsquo s weak liquidity and high refinancing needs with looming debt matures are a pertinent credit risk,&rdquo Chua said in the Feb 10 note.  

 

Moody&rsquo s downgrade of LMIRT&rsquo s ratings come amid concerns over the trust&rsquo s lack of concrete refinancing plans, particularly for bank loans and US dollar bonds due within the next 18 months, 

 

It also flagged the trust&rsquo s weak liquidity, limited access to banking lines, and the risk of declining asset value of its Indonesian properties in terms of Singapore dollars. 

 

Chua said the trust&rsquo s interest coverage is expected to remain weak through 2023 and 2024, and is likely to worsen with rising interest rates and new bank loans. 

https://links.sgx.com/FileOpen/Moody_Downgrades_LMIRT.ashx?App=Announcement& FileID=746381

ANNOUNCEMENT MOODY&rsquo S DOWNGRADES LIPPO MALLS INDONESIA RETAIL TRUST&rsquo S RATING TO Caa1 FROM B3

LMIRT Management Ltd (the &ldquo Manager&rdquo ), the manager of Lippo Malls Indonesia Retail Trust (&ldquo LMIR Trust&rdquo ), wishes to announce that Moody&rsquo s Investors Service (&ldquo Moody&rsquo s&rdquo ) has downgraded the corporate family rating of LMIR Trust and the backed senior unsecured bond issued by LMIRT Capital Pte. Ltd., a wholly-owned subsidiary of LMIR Trust, to Caa1 from B3. The outlook on all ratings remains negative.

As previously announced on 3 January 2023 and on 1 February 2023, the Manager continues to explore options and measures to maintain a sustainable capital structure and reduce the aggregate leverage of LMIR Trust. In light of such measures and the downgrade in credit rating by Moody&rsquo s, the distributions to Unitholders and holders of perpetual securities may be negatively affected, in accordance with the terms of the applicable documentation.

The Manager wishes to highlight that LMIR Trust remains in compliance with its financial covenants and the aggregate leverage limit as prescribed under the Property Funds Appendix.

Please refer to Moody&rsquo s press release at www.moodys.com.