Moody's downgraded its rating on Singapore-based retail real estate investment trust Lippo Malls Indonesia Retail Trust to a non-investment grade corporate family rating of Ba1 from an investment-grade issuer rating of Baa3.
The outlook on the rating is negative.
The action follows a review that the rating agency initiated in December 2017. Moody's attributed the downgrade to a weakening of the trust's financial metrics and the deteriorating credit quality of key entities within the Lippo group.
The REIT's aggressive debt-funded acquisitions and the weaker Indonesian rupiah against the Singapore dollar pushed its adjusted debt/total deposited assets ratio to 41% at Dec. 31, 2017, surpassing Moody's downward rating threshold of 40%.
The agency pointed toward the company's reported debt/assets ratio of 34% as at Dec. 31, 2017, noting that this is well below the Monetary Authority of Singapore's requirement of 45%.
Jacintha Poh, Moody's lead analyst for Lippo Malls, noted the company's increased refinancing risk following the use of a short-term credit facility of S$80 million to partially finance its acquisitions of two retail malls in December 2017.
As of March 6, US$1 was equivalent to S$1.32.
