(The following was released by the rating agency)
SINGAPORE, November 14 (Fitch) Fitch Ratings has assigned Indonesia-based PT Lippo Karawaci Tbk’s (LK, ‘BB-'/Stable) USD100m 7% notes due 2019 and USD273.3m 6.125% notes due 2020 final ‘BB-’ ratings. The new notes, issued by Theta Capital Pte. Ltd., are guaranteed by LK.
The rating action follows receipt of documents conforming to information already received. The final rating is in line with the expected rating assigned on 15 October 2012.
The USD100m bonds are issued as a tap to the existing USD150m 7% notes due 2019, while the 2020 new notes will be exchanged for the existing USD395.6m notes due 2015 originally issued by Sigma Capital Pte Ltd. Investors holding USD119.2m notes originally due in 2015 have opted not to subscribe to the exchange offer. The notes due 2019 and 2020 and the USD119.2m notes due 2015 are rated ‘BB-’ and subject to identical covenants.
LK plans to use the proceeds from the tap issue to fund capex and for general corporate purposes. Fitch is of the view that the incremental debt will not impair LK’s current financial profile, which is supported by Indonesia’s favourable long-term demand for residential properties and healthcare services, a continued strong recurring income base, and LK’s demonstrated track record in these businesses.
A high proportion of recurring income from healthcare, retail malls, and hospitality helps mitigate the impact of volatile income from property development and allows the company to maintain a sound financial profile. This recurring income provides adequate interest and fixed charge coverage. LK’s ratings also reflect its well-distributed debt maturity profile.
What Could Trigger a Rating Action?
Positive: Not foreseen in the medium term as LK’s operating exposure to the cyclical real estate industry is high.
Future developments that may, individually or collectively, lead to a negative rating action include:
-Recurring EBITDA interest cover falling below 1.50x (H112: 2.04x)
-Recurring EBITDA fixed-charge cover falling below 1.25x (H112: 1.72x) -Failure to pre-fund projected capex