March 12, 2019 / 8:02 AM / 3 months ago

UPDATE 2-Indonesia's Lippo Karawaci to raise $1 bln in funding, names CEO

* Lippo Karawaci aims to raise $1 bln in funding

* Will get $730 mln from rights issue underwritten by Riady family

* Remaining $280 mln to come from asset divestment plans

* Lippo Karawaci announces cash tender offer for its dollar bonds (Adds Credit Suisse as financial adviser)

By Cindy Silviana and Fanny Potkin

JAKARTA, March 12 (Reuters) - Indonesian property developer Lippo Karawaci 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, 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 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.

Credit Suisse is the sole financial adviser to Lippo Karawaci, and dealer-manager for the bond tender.

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.

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, additional reporting by Anshuman Daga; Editing by Himani Sarkar)

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