Research: Rating Action: Moody’s downgrades Lippo Malls Indonesia Retail Trust to B2; the outlook remains negative


Singapore, June 22, 2022 — Moody’s Investors Service (“Moody’s”) has downgraded Lippo Malls Indonesia Retail Trust (LMIRT) family of companies rating from B2 to B1.

Moody’s also lowered the senior unsecured rating backed by the bonds issued by LMIRT Capital Pte. Ltd., a wholly owned subsidiary of LMIRT, to B2 from B1. The bonds are guaranteed by the trustee of LMIRT.

The outlook on all ratings remains negative.

“The downgrade reflects our expectation that LMIRT credit metrics will remain weak despite an improving operating environment in Indonesia as restrictions ease. of the trust’s interest weakens further given its high proportion of floating rate debt,” said Rachel Chua, vice president and principal analyst at Moody’s.

“The downgrade also reflects the weakening of the trust’s financial policy, as evidenced by its increasing proportion of variable rate debt over the past three years, as well as the limited flexibility within its regulatory leverage ratio. to adjust to a decline in asset values,” said Chua, who is also Moody’s senior analyst for LMIRT.


LMIRT interest coverage is likely to remain low at 1.5x-1.6x through 2023 and worsen if interest rates rise. As of March 31, 2022, only 42.5% of the trust’s debt is at a fixed rate.

Moody’s also estimates that LMIRT’s adjusted leverage – as measured by adjusted net debt/EBITDA – will improve but remain low at 8.0x-8.5x over the next 12-18 months as its rate of Occupancy will increase to 81% in 2022 and 83% in 2023, from 79% as of March 31, 2022.

As of March 31, 2022, LMIRT’s debt-to-deposited assets ratio of 42.9% was close to the regulatory limit of 45%. A weakening of the Indonesian rupiah against the Singapore dollar will expose LMIRT to a decline in asset values.

LMIRT’s B2 ratings reflect the trust’s established presence in Indonesia, with its portfolio spread across 12 Indonesian cities that have a large population base, targeting middle to upper middle income consumers in the country. The rating also incorporates the degree of independence of the trust as a listed and regulated trust in Singapore, despite the links between LMIRT and its sponsor, Lippo Karawaci Tbk (PT).

The negative outlook reflects LMIRT’s heightened refinancing risk in a tight funding market given the maturity of its SGD 135 million term loan to 2023 and its $250 million bond maturing in June 2024. It also reflects continued uncertainty surrounding the pace of recovery from the pandemic in an environment of inflation and slowing growth.

The liquidity of the LMIRT is sufficient. The trust had cash and cash equivalents of SGD 113 million as of March 31, 2022, an undrawn and committed line of SGD 23 million and annual operating cash flow of approximately SGD 50 million. , which will more than adequately meet its capital requirements and duration of SGD 67.5 million. loan maturing in November 2022. Nevertheless, we anticipate that the trust will have to rely on external financing to meet the maturity of its term loan in November 2023 as well as its US dollar bond maturing in June 2024 .

In terms of environmental, social and governance (ESG) factors, Moody’s considered governance risk arising from related party transactions between LMIRT and the Lippo group of companies. This risk is partially mitigated by regulatory oversight provided by the Monetary Authority of Singapore and exercised by the Company’s Board of Directors, which is comprised primarily of independent directors. Furthermore, there is an alignment of interests between LMIRT and its sponsor, Lippo Karawaci, as the latter holds 47.3% of the trust.


Given the negative outlook, an upgrade is unlikely in the next 12-18 months. Nonetheless, the outlook could return to stable if (1) LMIRT’s credit metrics strengthen through an improving operating environment or debt reduction such that its adjusted net debt/EBITDA remains below 8, 0x-8.5x and its adjusted EBITDA/interest expense remains permanently above 1.5x-2.0x; (2) it does not breach the regulatory leverage limit or financial covenants; and (3) it meets its refinancing needs through 2024 well in advance.

On the other hand, LMIRT ratings could be downgraded if: (1) the operating environment deteriorates further, leading to higher vacancy levels and lower operating cash flow or lower asset valuations; or (2) it fails to obtain funding for its debt maturing through 2024; or (3) the trust increases its exposure to the Lippo group of companies; or (4) the credit quality of the Lippo group of companies, including Lippo Karawaci, declines.

A violation of the regulatory leverage limit or its financial covenants would also likely result in a downgrade.

Specific financial indicators that Moody’s would consider for downgrade include (1) the trust’s adjusted net debt/EBITDA remaining above 8.5x or (2) adjusted EBITDA/interest expense remaining below 1.5x.

The main methodology used in these ratings was the “Methodology for REITs and other commercial real estate companies” published in July 2021 and available on Otherwise, please see the Scoring Methodologies page on for a copy of this methodology.

Lippo Malls Indonesia Retail Trust (LMIRT) is a real estate investment trust and has been listed on the Singapore Stock Exchange since November 2007. As of March 31, 2022, it had a portfolio of 22 malls and seven retail spaces in major cities in Indonesia. , with a total appraised value of approximately SGD 1.78 billion.


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Rachel Chua
Vice President – Senior Analyst
Corporate Finance Group
Moody’s Investors Service Singapore Pte. ltd.
71 Robinson Road #05-01/02
Singapore, 068895
JOURNALISTS: 852 3758 1350
Customer Service: 852 3551 3077

Vikas Halan
Associate General Manager
Corporate Finance Group
JOURNALISTS: 852 3758 1350
Customer Service: 852 3551 3077

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