Global credit rating agency Moody's Investors Service may cut the credit rating of Indonesia-based property company Lippo Karawaci. Main reason for the cut would be the delay in the property firm's release of its full-year 2017 financial report as well as a high amount of foreign-denominated debt and concern about the company's liquidity. It is the third time since last year that Lippo Karawaci delayed the publication of its financial report.
When Lippo Karawaci delayed the publication of its H1-2017 financial report, it blamed the delay on the planned IDR 3 trillion (approx. USD $219 million) rights issue of its subsidiary Siloam International Hospitals, one of the leading hospital operators in Indonesia. Later that year the company, again, announced to delay the release of corporate earnings. This time it blamed the delay on the rights issue plans of both Lippo Karawaci and its subsidiary Lippo Cikarang.
Although the rights issues should have been completed by the first quarter of 2018, underwriter Ciptadana Sekuritas has not provided any information about progress on both rights issues.
Meanwhile, Lippo Karawaci also failed to provide further information about its US dollar-denominated obligations. Therefore, a downgrade of its credit rating is likely, said Jacintha Poh, senior analyst at Moody's Investors Service. Per 30 September 2017, the portion of the company's US dollar-denominated debt reached 79 percent of its total debt. Poh said Lippo Karawaci may in fact delay or cancel the rights issues as the company's liquidity is currently weak, reflected by weak sales.
Moody's expects Lippo Karawaci's cash flow to weaken in the next 12 months because the company's short-term debt stands at IDR 1.34 trillion (approx. USD $97.8 million). Moreover, a syndicated loan (USD $50 million) will mature in September 2019, while another USD $410 million long-term loan will mature in April 2022. If the company fails to improve its performance and continues to delay financial reports, then Lippo Karawaci's rating will be cut by Moody's (from currently B1).
On Thursday (12/04) shares of Lippo Karawaci, listed on the Indonesia Stock Exchange, had fallen 1.24 percent to 478 a piece by 15:15 pm local Jakarta time.