Indonesia's Lippo Karawaci to raise $1 bln in funding, names CEO (updated)

Lippo China Resources

12/03/2019 08:00

* Lippo Karawaci aims to raise $1 bln in funding
    * Company names new management, with John Riady as CEO
    * $730 million to come from rights issue underwritten by
Riadys
    * $280 million to come from asset divestment plans
    * Lippo Karawaci announces cash tender offer for its dollar
bonds 

 (Adds John Riady interview, details from Meikarta bribery
probe)
    By Cindy Silviana and Fanny Potkin
    JAKARTA, March 12 (Reuters) - Indonesian property developer
Lippo Karawaci  LPKR.JK  said it plans to raise $1 billion in
new funding through a rights issue and sale of assets, and
unveiled a new management team, as it pushes to transform the
company and shore up its capital.
    Lippo, that recently faced liquidity issues and an alleged
bribery case, is the flagship real estate developer of the Lippo
Group  0226.HK , operated by the billionaire Riady family.
    The Riady family has proposed to underwrite a $730 million
rights issue at 235 rupiah ($0.017) per share as part of the new
funding. Lippo shares plunged to a 15-year low after the news,
tracking the offer's 8 percent discount to their Monday close.
    The property developer - which named John Riady, grandson of
the group's founder Mochtar Riady, as its new CEO - said it will
get the remaining $280 million in proceeds from asset sales,
including a transfer of its Puri Mall holding to Lippo Malls
Indonesia Retail Trust.
    The funding "will solve our liquidity problems and greatly
strengthen our balance sheet" as the company re-focuses its
strategy on "housing, malls, and healthcare", CEO Riady said. 
    He pegged Lippo's total debt at $900 million.
    The rights issue shows "our family believes in Lippo", Riady
said, adding the new management and board of commissioners would
aim to "bring transparency and good corporate governance".
    The fact that U.S. investor George Raymond Zage III and Hong
Kong conglomerate Chow Tai Fook  1929.HK  are joining for a
total commitment of $70 million will allow the rights issue "to
gain trust from markets", Riady told Reuters.
    Lippo shareholders will vote on the rights issue at their
annual general meeting next month. 
    Earlier in the day, Lippo announced a new chief financial
officer, a director of projects, head of investor relations and
five new commissioners to its board, including Stephen Riady and
George Raymond Zage III.
        
    DOLLAR BONDS
    The property developer also announced a cash tender offer
for its dollar bonds due in 2022 and 2026 for up to a maximum
amount of $150 million.  
    Moody's cut the ratings of Lippo and its dollar bonds to B3
in September, while Fitch and S&P rate them at CCC+ following
recent downgrades.
    S&P has a negative outlook for the company amid expectations
the property market will remain subdued for Southeast Asia's
largest economy ahead of the presidential election in April.
    Lippo Karawaci has faced controversy since October after
Indonesia's anti-graft agency launched a bribery probe into
Lippo Group's $21 billion Meikarta real estate project, of which
Lippo Karawaci then owned 54 percent.  urn:newsml:reuters.com:*:nL3N1WY2OB 
    Investigators arrested nine people for bribery over land
permits related to Meikarta, including a top district government
official and a company director, but did not accuse any Lippo
companies of wrongdoing.
    "There's a lot of misunderstandings about the Meikarta issue
and about the permits. We have had the land for 30 years," said
Riady, adding the companies had never been suspects in the case.
    Lippo Karawaci now owns 49 percent of Meikarta through its
main subsidiary Lippo Cikarang.
    "We are communicating with markets and buyers to clarify.
Investment opportunities still exist. This is the thrill of
doing business in Indonesia" 
 ($1 = 14,265.0000 rupiah)

 (Reporting by Fanny Potkin; Editing by Himani Sarkar)
 ((f.potkin@thomsonreuters.com;))