Meikarta Scandal Shaking Lippo Group’s Business Tree

Penulis: Amal Ihsan Hadian

Editor: Yura Syahrul

23/10/2018, 15.15 WIB

Referring to the Altman Z-score calculation analysis, several Lippo Group companies actually have a high probability of bankruptcy.

Properti - Telaah | Ioulia Bolchakova

The investigation of the alleged bribery for Meikarta project licensing continues to roll and leads to the Lippo Group companies and its founder James Tjahaja Riady, even though the megaproject is touted to be a new money machine for Lippo amid sluggish liquidity and a pile of debts from a number of its subsidiaries in the property and retail sectors. This case also eroded the capitalisation value of Lippo companies in the stock market and increased the risk of bankruptcy of their business.

On Thursday (10/18) last week, the Corruption Eradication Commission (KPK) searched James Riady’s house in Taman Golf Housing, Lippo Village, Tangerang. The office of PT Lippo Karawaci Tbk (LPKR) in Menara Matahari, which is located not far from the house, was also inspected. The anticorruption agency also did the same thing at the office of the property developer’s subsidiary, PT Lippo Cikarang Tbk (LPCK), in Bekasi.

In total, the KPK had conducted searches in 12 locations. In addition to those three places, the investigation team also came to the offices of Bekasi Regency Capital Investment and One-Stop Integrated Services Agency (DPMPTSP) and Bekasi Regent Neneng Hassanah Yasin, Regent Neneng’s private house, the houses of Lippo Group executive Billy Sindoro, and Trivium Terrace apartment in Bekasi.

The search followed the arrest of nine suspects in the alleged bribery case of the Meikarta project permit. Four people allegedly gave bribes. They are Billy Sindoro (Lippo Group Operational Director), Taryudi (Lippo Group Consultant), Fitra Djaja Purnama (Lippo Group Consultant), and Henry Jasmen (Lippo Group Employee).

Meanwhile, five people allegedly received the bribes. They are Neneng Hasanah Yasin (Bekasi Regent), Jamaludin (Head of Bekasi Regent Public Work Agency), Sahat MBJ Nahor (Head of Bekasi Regent Fire Department), Dewi Tisnawati (Head of Capital Investment Agency), and Neneng Rahmi (Head of Spatial Planning at Public Work Agency). They allegedly received bribes of Rp 7 billion from a total commitment of Rp 13 billion.

Since it was started, the construction of the new city worth Rp 278 trillion with a total area of 774 hectares in Cikarang, West Java, has been hampered by the controversy over licensing issues. According to KPK Deputy Chairman Laode M. Syarif, the bribe was intended to smooth out the granting of permit in three phases – permit for an area of 84.6 hectares (first phase), 252 hectares (second phase), and 101.5 hectares (third phase).

James Riady
James Riady (Donang Wahyu|KATADATA)

The investigation of this case can hit the Lippo Group from various sides. Besides disrupting the sale and construction of the Meikarta project, Lippo can be charged with a corporate corruption case.

This is in accordance with Law No. 21/2001 on Corruption Crimes and Supreme Court Regulation No. 13/2016 on Procedures for Handling Corporate Cases. “The KPK can declare the company as suspect considering all of the permits are obtained for the benefit of the company,” said Abdul Fickar Hajar, criminal law expert from Trisakti University.

The case also hit the stock prices of several Lippo Group companies listed on the Indonesia Stock Exchange (IDX). Lippo Karawaci’s share price over the past week dropped 5.07 percent to Rp 272 per share on Friday (19/10).

At the same time, the share price of Lippo Cikarang, which is the holding company of PT Mahkota Sentosa Utama (MSU) as the Meikarta project developer, also fell 6.53 percent to Rp 1,300 per share. Lippo Karawaci’s subsidiary, PT Siloam Hospitals Tbk (SILO), also suffered a stock price decline of 4.56 percent.

Misfortune also hit Lippo’s subsidiaries in the non-property sector. The share price of PT Matahari Department Store Tbk (LPPF) fell 6.6 percent, while PT Matahari Putra Prima Tbk (MPPA) dropped 6.05 percent over the past week. PT Bank National Nobu Tbk (NOBU) stock price fell 0.55 percent.

The share price of PT Multipolar Tbk (MLPL) – the parent company of the Lippo retail sector – had dropped 9.85 percent when news of the arrest of Billy Sindoro and his friends appeared on Monday (15/10).

The price of bonds issued by Lippo companies also declined. This increased the financial burden to pay debt interest. As of 17 October, the yield to maturity of Lippo Karawaci’s US dollar-denominated bonds due in 2022 and 2026 rose by 8 percent since issued. Therefore, the company must bear a higher interest to pay its debt that will mature in the next 12-18 months.

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