UPDATE: LMIR Trust assigned credit ratings by Moody’s and Fitch

Indonesian rupiah notesIndonesian rupiah notes

This article was originally published on Monday, 3 June 2019 at 14:35 SGT; it has since been updated to include details on the Fitch rating.

Lippo Malls Indonesia Retail Trust said Monday that both Moody’s Investors Service and Fitch Ratings Singapore had assigned credit ratings to the trust.

“We are pleased with the ratings issued by both Moody’s and Fitch, which reflect their confidence in LMIR Trust’s established presence and strong portfolio of 30 income-producing retail assets in Indonesia,” James Liew, CEO of LMIRT Management, the REIT manager, said in the statement.

“With these ratings, we hope to diversify our financing tools to better manage our capital structure and the overall efficiency of our funding resources,” Liew added.

Moody’s on Monday assigned a Ba3 corporate family rating with a stable outlook, as well as a Ba3 backed senior unsecured rating to the bond issued by LMIRT Capital, a wholly owned subsidiary of LMIR Trust. A Ba3 rating is the third highest rating of speculative grade.

The corporate family rating reflects an established presence in Indonesia and the trust’s portfolio of retail malls and spaces across 10 cities in the country, Moody’s said in a statement Monday.

“Further, the trust generates a predictable income stream from its asset portfolio, with healthy occupancy rates, well-balanced lease expiry profiles and favorable lease payment structures,” Moody’s said.

The ratings agency added the rating could rise if the trust reduces its exposure to Lippo group companies, which is around 26 percent of its revenue.

Fitch gave LMIR Trust an expected long-term issuer default rating of BB(EXP), with a stable outlook. EXP stands for expected. BB is a speculative grade, indicating an elevated vulnerability to default risk if business conditions worsen.

Fitch said its rating assumes LMIR Trust will use around S$170 million of debt to fund the acquisition of Lippo Mall Puri, which is due to be completed in the second half of this year.

The ratings agency added that the final rating would depend on the mix of debt and equity to complete the acquisition.

Fitch also estimated revenue from the four master-leased malls would fall significantly when the contracts expire, as underlying tenant revenue and occupancy are “considerably lower” than the contracted values.

The Lippo Mall Kemang mall master lease, which is the largest of the four, expires mid-December, and revenue from the mall is expected to fall by around 30 percent, dragging the trust’s total revenue by around 4 percent, Fitch estimated.

 

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