ArrowArtboardCreated with Sketch.Title ChevronTitle ChevronEye IconIcon FacebookIcon LinkedinIcon Mail ContactPath LayerIcon MailMenu BurgerPositive ArrowIcon PrintIcon SearchSite TitleTitle ChevronIcon Twitter
Companies

Lippo Karawaci downgraded to B2 by Moody's

Rating agency raises worries about company's operating cashflow

Lippo Karawaci is a conglomerate that also operates hospitals.   © Reuters

BADUNG, Indonesia -- Moody's Investors Service has downgraded Lippo Karawaci's credit rating from B1 to B2 with a negative outlook amid concerns about the company's liquidity.

Lippo Karawaci, Indonesia's largest hospital operator and a unit of conglomerate Lippo Group, had been put on a rating watch by Moody's in mid-April after it failed to file its full-year 2017 results on time, the third time over the last year that it had failed to do so.

The company released its audited 2017 results last week that revealed weaker-than-expected operating cash flow, suggesting it may not be able to meet interest payments at the holding company level, said Jacintha Poh, senior analyst at Moody's.

Poh added that the downgrade also reflected the "shift in Lippo Karawaci's business mix over the next 12-18 months, such that its operating cash flows will be reliant on asset sales that are subject to delays and market conditions."

Moody's noted that without the asset sales, the company's net operating cash outflow will be around 800 billion rupiah ($57.5 million). The rating agency added that the company had short-term debt of 1.9 trillion rupiah at the end of 2017, and that it expects Lippo to have "sufficient undrawn committed facility" to cover the debt maturities in 2018, but "remains exposed to refinancing risk in 2019."

Lippo Karawaci had already been downgraded by S&P Global Ratings in December to B from B+ reflecting "Lippo's eroded interest servicing capacity, financial flexibility, and liquidity amid aggressive growth aspirations and softer operating conditions."

The property market in Indonesia over the last couple of years has been subdued, which has hit companies operating in the sector. Lippo, on the other hand, was able to mitigate the income shortfall by selling assets like retail malls and hospitals to its listed REITs in Singapore. But S&P noted that "the ability of these vehicles to absorb more assets has started to decline following the regulatory leverage caps on Singapore-listed REITs enacted mid-2015."

Lippo Karawaci's 2017 results showed the company struggled last year. Revenues were more or less flat compared to the year earlier at 11 trillion rupiah, while its net profit plunged 30% year on year to 614 billion rupiah.

Sponsored Content

About Sponsored Content This content was commissioned by Nikkei's Global Business Bureau.

You have {{numberArticlesLeft}} free article{{numberArticlesLeft-plural}} left this monthThis is your last free article this month

Stay ahead with our exclusives on Asia;
the most dynamic market in the world.

Stay ahead with our exclusives on Asia

Get trusted insights from experts within Asia itself.

Get trusted insights from experts
within Asia itself.

Get Unlimited access

You have {{numberArticlesLeft}} free article{{numberArticlesLeft-plural}} left this month

This is your last free article this month

Stay ahead with our exclusives on Asia; the most
dynamic market in the world
.

Get trusted insights from experts
within Asia itself.

Try 3 months for $9

Offer ends June 30th

Your trial period has expired

You need a subscription to...

  • Read all stories with unlimited access
  • Use our mobile and tablet apps
See all offers and subscribe

Your full access to the Nikkei Asian Review has expired

You need a subscription to:

  • Read all stories with unlimited access
  • Use our mobile and tablet apps
See all offers
NAR on print phone, device, and tablet media