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S&P downgrades PT Lippo Karawaci

S&P Global Ratings downgraded PT Lippo Karawaci's long-term corporate credit rating to B from B+, with a stable outlook.

The rating agency said in a release that the recent dilution of PT Lippo's stake in hospital operator Siloam to 51.05%, from nearly 60%, has reduced the developer's financial flexibility, as well as its interest-servicing capacity and liquidity. S&P also highlighted the negative impact of the subdued Indonesian property market on the company's revenue and profit growth. It added that PT Lippo had become increasingly reliant on the sale of sizable assets at the holding company to maintain an adequate cash buffer to service interest at that level.

S&P expects the company's consolidated reported EBITDA margins to fall to between 10% and 16% in 2018 and 2019, from over 20% historically.

The stable outlook reflects S&P's view that Lippo Karawaci's cash flow adequacy and interest servicing capacity will stabilize at the lower levels over the next year.

S&P Global Ratings and S&P Global Market Intelligence are owned by S&P Global Inc.