Indonesian real estate developer Lippo Karawaci has secured US$1.01 billion ($1.37 billion) in funding from a rights issue and asset divestment.
It has also appointed Mr John Riady as chief executive and Mr Surya Tatang as chief financial officer, both with immediate effect as part of a transformation plan to "recapitalise" the company, revamp its leadership and refocus its business on three core competencies - urban housing, lifestyle malls and healthcare.
The US$1.01 billion in funding comprised US$730 million from the rights issue underwritten by the Riady family and US$280 million from asset divestments.
Lippo Karawaci sold its interest in two healthcare joint ventures in Myanmar to OUE Lippo Healthcare last month, a move expected to generate US$20 million in net proceeds upon completion in the first half of the year. Lippo Karawaci also entered into a conditional sale and purchase agreement with Lippo Malls Indonesia Retail Trust (LMIRT) to sell the retail components of Lippo Mall Puri for an aggregate consideration of US$260 million. The transaction is expected to conclude in the second half of the year.
The funding programme aims to "right size" Lippo Karawaci's balance sheet through deleveraging and repayment of up to US$275 million of debt. It will also provide it with sufficient liquidity to fund debt interest and real estate investment trust (Reit) rental obligations through to the end of 2020 and "unlock shareholder value" through investments in existing key projects.
Lippo Karawaci will conduct a bond tender offer to partially buy back up to US$150 million of its outstanding US$410 million 7 per cent senior notes due 2022, and US$425 million 6.75 per cent senior notes due 2026.
It will also undertake a debt repayment initiative, with plans to utilise US$125 million towards the repayment of other loans due within the next two years. Balance amounts from the partial bond buyback will be used for debt repayment and/or general corporate purposes.
Lippo Karawaci will also invest up to US$100 million of the funding proceeds in the development of eight existing key projects in the next three years. These are 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 projects is around US$275 million.
In addition, Lippo Karawaci will invest up to US$200 million of the funding to develop Meikarta - an integrated development - by subscribing to its pro-rata 54.4 per cent rights entitlement.
It added that it expects to incur transaction-related taxes and expenses and Reit rental obligations amounting to US$60 million as part of the sale of Lippo Mall Puri.
Lippo Karawaci said it is also "committed to maintaining" its 30.7 per cent stake in LMIRT by participating in the potential future equity fund raising by LMIRT associated with the acquisition of Lippo Mall Puri. This would require an estimate of US$60 million of funding from Lippo Karawaci.
