Feb 10, 2011

Lippo Karawaci & US$130 million notes

Fitch Ratings has assigned Sigma Capital Pte Ltd's proposed notes of up to US$130 million due in 2015 an expected B+(exp) rating and an expected RR4 Recovery Rating.
In an official statement obtained today, the notes are to be guaranteed by PT Lippo Karawaci Tbk (LPKR) B+/Stable).
The final ratings are contingent upon the receipt of documents conforming to information already received.
The proposed notes are part of LPKR's 2015 guaranteed senior notes programme, which is rated by Fitch at B+ and RR4.
The new notes are not expected to affect LPKR's total indebtedness as the proceeds are to be used for debt refinancing-US$66.2 million of notes coming due in March 2011 and bank loans amounting to US$49.8 million.
Lippo Karawaci's ratings reflect its position as one of Indonesia's leading property developers with a diversified revenue base, substantial cash generation from recurring sources and its comfortable liquidity position.
The company's diverse land bank provides it with the flexibility to launch projects according to market demand.
In FY10, 56% of LPKR's revenues and 49% of gross profits came from recurring businesses such as healthcare, hospitality, township infrastructure, and property and portfolio management.
However, the company's ratings are constrained by the highly cyclical nature of its property development operations, which currently account for about half of its EBITDA.
In FY10, LPKR's annual revenues increased 22% to Rp3.13 trillion and operating EBITDAR increased 34% to Rp1 trillion compared with FY09; the company reported higher revenues across all its operating segments.
As a result, its funds from operations fixed charge coverage improved to 2x in FY10 from 1.3x in FY09.
LPKR raised Rp2.4 trillion via a new share issue in late 2010, which remained unutilised at end-2010; year-end cash reserves totalled Rp3.7 trillion.
The company intends to use these funds to step up its hospital and retail mall development activity over the short- to medium-term.
Fitch expects that, as in past practice, LPKR will maintain its balance sheet quality and liquidity by disposing of these assets when they become operational.

Disclosure: No position at the stock mentioned above.  

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