LIPPO Malls Indonesia Retail Trust’s (LMIRT) aggregate leverage ratio is estimated to have reached 45.2 per cent, up from the last disclosed 43.7 per cent as at end-March 2024.
This came mainly as the rupiah appreciated by a significant 3.5 per cent against the Singapore dollar, reducing the value of LMIRT’s assets after translation into the latter currency.
A 0.9 per cent appreciation of the US dollar against the Singapore dollar further contributed to the increase, as the trust’s outstanding US dollar notes grew in value upon currency translation.
On Tuesday (Jun 25), the Indonesian retail real estate investment trust’s (Reit) manager noted LMIRT’s latest gearing ratio to be “marginally” above the 45 per cent regulatory limit.
It also denied breaching the aggregate leverage limit of 45 per cent as defined in the Singapore Exchange’s Collective Investment Schemes code.
In Singapore, the regulatory gearing limit for Reits is 45 per cent with the exception of those with an interest coverage ratio of at least 2.5 times, which then allows for a maximum limit of 50 per cent.
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This limit is not considered to be breached if the limit is exceeded due to circumstances beyond the manager’s control.
“A decline in the asset value of LMIRT as a consequence of a depreciation of foreign exchange is a circumstance beyond the control of the manager,” said LMIRT’s manager.
“Under the Property Funds Appendix, if the aggregate leverage limit is exceeded as a result of a depreciation in the asset value of the property fund, the manager should not incur additional borrowings or enter into further deferred payment arrangements. Refinancing of existing borrowings is not construed as incurring additional borrowings.”
The manager also emphasised that the Reit’s existing loans do not contain any financial covenants linked to the aggregate leverage limit, and that the trust remains in compliance with financial covenants in its existing loans.
The 45.2 per cent gearing estimated by the manager remains subject to the finalisation of the Reit’s unaudited financial statements for the second quarter ending Jun 30.
The manager said it will make the necessary announcement once information on the actual aggregated ratio is available.
Units of LMIRT ended Monday flat at S$0.012.
