Bond Articles


Lippo Malls Indonesia Retail Trust: Stoppage of Perpetual Distributions

Timothy Ang  |   18 Dec 2020  |    792 views

On 14 December 2020, Lippo Malls Indonesia Retail Trust (LMIRT) announced (here) that distribution due to be paid on 19 December 2020 for its LMRTSP 6.6% perpetual bond will not be paid.

We provide an FAQ on this below:

1. Why did LMIRT stop its LMRTSP 6.6% perpetual bond distribution?

As at 30 September 2020, LMIRT’s aggregate distributable income less any distribution made to the holders of its perpetual securities and unitholders was zero. According to the terms of the US$250mn 7.25% senior notes guaranteed by LMIRT, if the amount is zero, LMIRT is only permitted to distribute up to US$5mn for the remaining life of the US$ notes due in 2024. LMIRT had distributed S$4.9mn [4.9?] in September 2020 to perpetual bondholders and S$2mn in 3Q20 dividends to unitholders. It has thus reached the US$5mn limit. As a result, LMIRT has elected not to pay the distribution on 19 December 2020.

2. Can perpetual bond distributions be stopped?

Perpetual bonds are usually subordinated in rank, ranking only above unitholders. As such, they have a lower secured nature. Some perpetuals, including LMIRT’s perpetual bonds, include an interest deferral clause. This allows the issuer to elect not to pay a distribution in whole or in part.

3. Is the LMRTSP 7% perpetual bond distribution also stopped?

Yes. The terms of the US$250mn 7.25% guaranteed senior notes pertain to all of LMIRT’s perpetual bonds and REIT units. Also, LMIRT’s election to stop distribution for its 6.6% perpetuals triggered its dividend stopper clause. This prevents any distribution for other perpetual bonds.

4. Will LMIRT perpetual bondholders be repaid any of the missed coupons in the future?

It depends. Under the non-cumulative clause of LMIRT’s perpetuals, LMIRT is not under any obligation to pay any distribution that has not been paid in whole or in part. However, LMIRT has indicated that it intends to make an optional distribution of the full sum of the unpaid December 2020 distribution should it successfully complete its rights issue announced on 23 November 2020.

5. When will LMIRT complete its rights issue?

On 23 November 2020, LMIRT proposed to undertake a non-underwritten rights issue of up to 4,682,872,029 new units to raise gross proceeds of S$281.0mn. Expected date of issuance is 21 January 2021. Approval from LMIRT unitholders was obtained at an EGM held on 14 December 2020. To demonstrate its support for LMIRT and the rights issue, sponsor PT Lippo Karawaci Tbk has agreed to subscribe to 4,682,872,029 rights. This is the total number of rights units which will be issued.

6. When can perpetual bondholders expect distribution to resume?

Distribution can resume when conditions of the US$250mn 7.25% notes and the dividend stopper clause of the 6.6% perpetuals are met. Conditions of the US$ notes for the resumption of distribution are:

1) If the aggregate of distributable income less any distribution made to the holders of the perpetual securities and unitholders is greater than zero, or
2) Upon the maturity of the US$250mn 7.25% guaranteed senior notes in 2024, or
3) Upon the US$ noteholders’ consent, or
4) Upon new equity injections or rights issues.

Conditions for a lifting of the dividend stopper are:

1) A redemption of all outstanding 6.6% perpetual securities (next call date is 19 December 2022), or
2) Full payment of the next scheduled distribution, or
3) Full payment of an optional distribution equal to the amount of distribution that was unpaid in full or in part on 19 December 2020; or
4) Permission by an extraordinary resolution of the perpetual securityholders.

Distributions may resume upon completion of the Lippo Malls Indonesia Retail Trust rights issue on 21 January 2021. LMIRT has indicated that it intends to make an optional distribution of the full sum of the unpaid 19 December 2020 distribution using proceeds from its rights issue.

Related Articles

Vertex Ventures Holdings Ltd: Temasek-linked Venture Capital (Bonds)

Vertex Holdings Ltd is a venture capital investment holding company wholly-owned by Temasek, focused on investing in disruptive technologies.

Phillip Credit Team  |   28 Jul 2021

ESR Cayman: Logistic Real Estate Leader (Bonds)

ESR Cayman is a logistic real estate leader benefitting from powerful growth trends in ecommerce and years of under-investment into APAC.

Timothy Ang  |   22 Jul 2021

Market outperformer: AIMS APAC REIT (bonds)

AIMS APAC REIT is riding secular demand for logistics and warehousing facilities from e-commerce.

Timothy Ang  |   12 Jul 2021

Disclaimers


These commentaries are intended for general circulation. It does not have regard to the specific investment objectives, financial situation and particular needs of any person who may receive this document. Accordingly, no warranty whatsoever is given and no liability whatsoever is accepted for any loss arising whether directly or indirectly as a result of any person acting based on this information. Opinions expressed in these commentaries are subject to change without notice. Investments are subject to investment risks including the possible loss of the principal amount invested. The value of the units and the income from them may fall as well as rise. Past performance figures as well as any projection or forecast used in these commentaries are not necessarily indicative of future or likely performance. Phillip Securities Pte Ltd (PSPL), its directors, connected persons or employees may from time to time have an interest in the financial instruments mentioned in these commentaries. Investors may wish to seek advice from a financial adviser before investing. In the event that investors choose not to seek advice from a financial adviser, they should consider whether the investment is suitable for them.

The information contained in these commentaries has been obtained from public sources which PSPL has no reason to believe are unreliable and any analysis, forecasts, projections, expectations and opinions (collectively the "Research") contained in these commentaries are based on such information and are expressions of belief only. PSPL has not verified this information and no representation or warranty, express or implied, is made that such information or Research is accurate, complete or verified or should be relied upon as such. Any such information or Research contained in these commentaries are subject to change, and PSPL shall not have any responsibility to maintain the information or Research made available or to supply any corrections, updates or releases in connection therewith. In no event will PSPL be liable for any special, indirect, incidental or consequential damages which may be incurred from the use of the information or Research made available, even if it has been advised of the possibility of such damages. The companies and their employees mentioned in these commentaries cannot be held liable for any errors, inaccuracies and/or omissions howsoever caused. Any opinion or advice herein is made on a general basis and is subject to change without notice. The information provided in these commentaries may contain optimistic statements regarding future events or future financial performance of countries, markets or companies. You must make your own financial assessment of the relevance, accuracy and adequacy of the information provided in these commentaries.

Views and any strategies described in these commentaries may not be suitable for all investors. Opinions expressed herein may differ from the opinions expressed by other units of PSPL or its connected persons and associates. Any reference to or discussion of investment products or commodities in these commentaries is purely for illustrative purposes only and must not be construed as a recommendation, an offer or solicitation for the subscription, purchase or sale of the investment products or commodities mentioned.

Enquiry


Have an enquiry? Get in touch with us at (+65) 6212 1818 or message us below!
Not yet an account holder? Open an account online here