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Sunday, April 11, 2010

Bond rating of Lippo Karawaci B+

Saturday, 10/04/2010 00:00 WIB

Irvin Avriano A.

Bond rating of Lippo Karawaci B+

JAKARTA: Global bond of PT Lippo Karawaci Tbk which will be issued by the subsidiary firm has got B+ and B1 rating from two international rating companies.

The bonds that will be issued by Sigma Ca pital Pte Ltd will have maximum issuance worth US$350 million. The company has appointed Deutsche Bank AG and Ci tigroup as the underwriters.

As from the figure, some US$250 million will be used by the company to pay corporate bonds with equal value maturing early next year and the rest will be used as the capital expenditure this year.

The mature bond is issued by Lippo Karawaci Finance BV and fully underwritten by Lippo Karawaci.

The review of emitter and bond rating from two rating companies, the Fitch Ratings and Moody's Investors Service, completed the rating review which was formerly set by the Standard&Poor's (S&P). S&P gave the bond rating of one of the Lippo Group firms at the level of B.

In the research released yesterday, the Fitch set the stable level prospect and long term national rating at the level of BBB+(idn). The Fitch also gave similar rating and recovery rating at the level RR4 to Lippo Karawaci Finance BV.

Fitch considered the natural cycle of property development in Indonesia is one of the factors limiting the corporate bond rating.

The corporate cash flow comes from health, city infrastructure, property, and portfolio management business could mitigate the corporate risks. The Fitch also considered the split of large scale projects in some phases could minimize the project failure risks.

Analyst-AVP Moody's Kaven Tsang in his research said the bond rating will weaken the projection value of profit interest coverage before interest tax, depreciation, and amortization (EBITDA) two folds under that of this year.

“The condition of EBITDA will place the emitter bond rating on weak position at the given B1 rating, “ said Tsang.

The expectation of soaring EBITDA in some hospital projects developed by the company and property sales rise in 2001 could return the debt to EBITDA ratio. This is possible with the possible growth ratio into 2.5 times which could return the position into B1 level which is deemed secure.

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