Lippo Malls Indonesia Retail Trust downgraded by Moody’s

Indonesian rupiah notes. Photo by Mufid Majnun on UnsplashIndonesian rupiah notes. Photo by Mufid Majnun on Unsplash

Moody’s Investors Service has downgraded Lippo Malls Indonesia Retail Trust (LMIR Trust) to B2 from B1, keeping a negative outlook, the ratings service said in a statement Wednesday.

“The downgrade reflects our expectations that LMIRT’s credit metrics will remain weak despite improving operating environment in Indonesia as [Covid-related] restrictions ease. Rising interest rates also heighten risks that the trust’s interest coverage will further weaken given its high proportion of floating-rate debt,” Rachel Chua, a Moody’s vice president and senior analyst, said in the statement.

The negative outlook reflects the REIT’s higher refinancing risks in a tight funding market, Moody’s said, citing S$135 million in loan maturities through 2023, and a US$250 million bond maturing in June 2024.

While LMIR Trust’s liquidity is “adequate” for its capital requirements, the trust is likely to need to rely on external funding for a term loan maturity in November 2023, and the U.S. dollar bond coming due in June 2024, Moody’s said.

A weaker Indonesian rupiah against the Singapore dollar will also expose the REIT to asset value declines, Moody’s said.

In response to the downgrade, LMIR Trust said in a statement filed to SGX: “The manager wishes to highlight that LMIR Trust remains in compliance with its financial covenants and the aggregate leverage limit.”