At the same time, the agency has lowered the company’s national longterm rating and set a negative outlook. All ratings have been released from the Negative Watch Rating, which was previously set on May 3, 2018.
It said, the downgrade follows a significant weakening of the cash flow of Lippo property development amid to weak ongoing demand for the company’s products due to the company’s focus on middle and upper segment customers and weak execution of several projects which resulted in delayed completion of projects and reduced strength of the Lippo brand.
In Fitch’s view, could get worse with allegations of bribery and investigations of corruption cases relating to the Meikarta Project, Lippo association owned by 27%, PT Makhota Sentosa Utama. It said, the profile of Lippo credit could weaken further if there were large financial liabilities.
Lippo has postponed the launch of several of its projects in an effort to maintain margins in challenging property market conditions, mainly due to the most affected Lippo demographic target. The company plans to sell several non-cores assets to finance operational cash flows and interest payments in the next few years, which makes liquidity risk higher at the parent level standalone, because the sale of assets is exposed to market risk and potential delays are beyond management’s control.