How Indonesia’s Lippo empire fought back from the brink after being crippled by debt
- Since John Riady became chief executive officer in March, Lippo shares have surged 37 per cent while its dollar bonds have also rallied
- Optimism has been spurred by rising demand for homes in Indonesia, the world’s fourth-most populous nation
At a meeting to discuss rescue options, tycoon Mochtar Riady, 90, the founder of the group, turned to his young grandson for help. Reluctant at first, John Riady – a Wharton School graduate – said he eventually agreed to run the troubled flagship PT Lippo Karawaci. His salvage plan included a US$788 million rights issue in July, sale of assets and a debt recast.
The measures have helped ease a cash squeeze and put the money-losing, listed property unit on a path to recovery. The revamp will start returning positive cash flow starting next year, while the company will continue to dispose of non-core assets to pare debt, the junior Riady said. In a show of confidence, shares of the developer have surged 37 per cent since he became the chief executive officer in March, while its dollar bonds have also rallied.
A family member stepping in “sends a message to the market that we are serious about it and we are committed to it,” Riady, 34, said in an interview on Monday at a golf course developed by his company on the outskirts of Jakarta. “That you are not going to default, you are going to fix things.”
Having tided over the crisis that also threatened to drag down the wider, 68-year-old banking-to-media-to-hospitals empire, the Riady scion is already charting a new course for growth. The focus would be mainly on property development and health care – legacy businesses that are “relatively protected from the digital revolution”, Riady said.
The tycoon wants Lippo to be among the largest real estate companies in Southeast Asia within two decades, rivalling regional giants such as Philippines’ Ayala Land and Singapore’s CapitaLand.
