LMIR Trust won’t redeem its S$140M 7 percent perpetual securities

Lippo Mall Puri, part of the St Moritz Jakarta Integrated Development located in West Jakarta. Lippo Malls Indonesia Retail Trust, or LMIR Trust, agreed to aquire the mall in March 2019. Credit: LMIR TrustLippo Mall Puri, part of the St Moritz Jakarta Integrated Development located in West Jakarta. Lippo Malls Indonesia Retail Trust, or LMIR Trust, agreed to aquire the mall in March 2019. Credit: LMIR Trust

Lippo Malls Indonesia Retail Trust said Tuesday its S$140 million 7.00 percent subordinated perpetual securities would not be redeemed on 27 September and instead the rate would be reset on that date to the prevailing five-year swap offer rate plus the initial spread of 5.245 percent.

The decision to allow the distribution rate to be reset rather than redeeming the securities was arrived at after considering the long-term interests of the trust and the current macroeconomic environment, LMIR Trust said in a filing to SGX.

“LMIR Trust will continue to remain prudent in implementing and executing its financial strategies while keeping flexibilities with the option to exercise its right to redeem the perpetual securities on any distribution payment date when market conditions normalise,” the filing said.

The trust cited three main factors in its decision:

  1. “Given the uncertainties of the prevailing operating environment, it is a better strategic option to preserve cashflow and liquidity;
  2. Assuming new debt for the purposes of the redemption of the perpetual securities will increase LMIR Trust’s leverage and reduce the debt headroom available for acquisition opportunities and asset enhancement initiatives during a market recovery; and
  3. Current market conditions are not favourable for LMIR Trust for the issuance of perpetual securities at a lower yield than the reset distribution rate.”