Indonesia's Lippo Karawaci Secures Funding US$1.01B
Lippo Group through PT Inti Anugerah Pratama sold around 9.44 percent its share ownership in property developer PT Lippo Karawaci Tbk - Photo by the Company

JAKARTA (TheInsiderStories) – Indonesia’ property developer, PT Lippo Karawaci Tbk (IDX: LPKR) has secured funding around US$1.01 billion to support the businesses and pay the debts, said the company on Tuesday (03/12). The funding comprising of $730 million from right issue and $280 million from the completion of its asset divestment plans.

The developer said, the two fund managers, George Raymond Zage III and Chow Tai Fook Nominee Ltd., have signed an undertaking agreement to purchase rights and to subscribe the rights issue shares with a total commitment of $70 million.

While, the Riady family, through PT Inti Anugerah Pratama or its wholly owned subsidiary, will act as a standby purchaser for any remaining rights issue shares not subscribed by other shareholders.

The rights exercise price has been set by the company at Rp235 ($0.01 per share). The rights exercise price represents a discount of 8.2 percent to the last closing price of the company on March 11, 2019.

The rights issue is subject to approval at an Annual General Meeting of Shareholders scheduled for April 18. It is expected to be completed in first half of 2019, with further details to be announced in due course.

For the divestment plans, LPKR has objective of realizing a total of $280 million of proceeds by end 2019. On Jan. 10, unit of Lippo Group announced the sale of its interest in two healthcare joint ventures in Myanmar, a 40 percent stake in Yoma Siloam Hospital Pun Hlaing Ltd., and a 35 percent stake in Pun Hlaing International Hospital Lmtd., to OUE Lippo Healthcare Ltd. The sale is expected to generate $20 million of net proceeds when the transaction is completed in first half of 2019.

Then, On March 11, LPKR entered into a conditional sale and purchase agreement with Lippo Malls Indonesia Retail Trust (LMIRT), pursuant to which LPKR agreed to sell the retail components of Lippo Mall Puri for an aggregate consideration of $260 million. The acquisition is targeted to complete in second half of 2019, subject to regulatory, shareholders and other approvals.

This funding program is set to right-size Lippo Karawaci’ balance sheet through deleveraging and repayment of up to $275 million of debt obligations, provide the comoany with sufficient liquidity buffer to fund debt interest and REIT rental obligations through year end 2020; and unlock shareholder value through investments in existing key projects.

Over the next three years, LPKR intends to invest up to $ 100 million of the funding proceeds in the development of eight existing key projects currently under construction–Holland Village, Millennium Village, Monaco Bay Residences, St. Moritz Makassar, Kemang Office, Embarcadero, Lippo Office Thamrin and Holland Village Manado.

The cost to complete these existing projects is estimated to amount to around $275 million, and will be fully funded by the $100 million investment capital, account receivables to be received from units sold, and future sales from completed projects and projects in construction.

Lippo Cikarang

Additionally, LPKR also intended to invest up to $200 million of the funding to develop Meikarta projects kn Bekasi, East Java,  by subscribing 54.4 percent rights entitlement, and acting as standby purchaser for any remaining rights issue shares not subscribed by other shareholders of PT Lippo Cikarang Tbk (IDX: LPCK). The unit planned to issue new shares with total amount $200 million.

The Meikarta project is expected to be the next breakthrough integrated development that will boast world-class infrastructure and facilities including shopping malls, international hospitals, universities, an international exhibition center, as well as a financial and technology hub.

Lastly, as part of the sale of Puri Mall, the company expects to incur transaction-related taxes and expenses and REIT rental obligations amounting to $60 million.Additionally, LPKR is committed to maintaining its existing 30.7 percent stake in LMIRT by participating in the potential future equity fundraising by LMIRT associated with the acquisition of Puri Mall. It is estimated that this would require approximately $60 million of funding from LPKR.

To deliver on this new business strategy, LPKR announced a new leadership team. Its newly nominated Board of Commissioners, comprising Independent President Commissioner John Prasetio, along with commissioners Stephen Riady, George Raymond Zage III, Kin Chan, and Anangga W. Roosdiono.

In addition, the company also announced the appointments of John Riady as Chief Executive Officer, Surya Tatang as Chief Financial Officer, Peter Yuas Director of Projects,and Bret Matthew Gineskyas Head of Investor Relations. Marshall Martinus will continue in his role as Chief Operating Officer.

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