Intu, the imperilled shopping mall REIT, has today announced that it is preparing for administration if rescue talks planned with its lenders this week fail to result in their desired outcome. The REIT, one of the UK’s largest retail property landlords, is hoping that lenders agree to restructure its debts. But if talks fail, the company’s board has lined up KPMG as administrator.
Intu owns 14 shopping centres across the UK, including Manchester’s Trafford Centre and the Lakeside shopping mall in Essex. The REIT has a Friday deadline to agree a covenant waiver with the lenders providing its revolving credit facility, including Barclays, HSBC and UBS.
Should lenders not agree to standstill arrangement or short-term extension to current credit facilities, Intu has warned it may be forced into administration and the closing of some of its portfolio of shopping centres.
Intu’s woes are a knock-on effect of the fact its own tenants have been struggling to pay their rents in the face of online competition and, more recently, the Covid-19 pandemic lockdown. That has seen the REIT, which directly employs around 2500 people, amass debts of its own that have risen to a huge £4.5 billion.
With retail sector analysts predicting as little of 10% of UK bricks-and-mortar retailers will pay their 2nd quarter rent in full this week, when most are due, Intu’s own creditors may be understandably unsure about the company’s future ability to manage the debt levels it has built up, if offered an extension. With new debt covenants set to be breached at the end of this month, the situation has become critical.
Intu’s £4.5 billion debt is split between borrowing at a corporate level and at an individual asset level, against the retail properties the REIT owns. A combination of rental income and valuation falls over the past couple of years, accelerating perhaps fatally since the onset of the coronavirus pandemic, has left the company on the brink.
Intu’s share price has slumped by over 90% this year and one sticking point in negotiations with creditors is how they will benefit from any future valuation recovery should they allow Intu the opportunity to survive and restructure by compromising on debts owed now.
Intu this morning releases a statement that read:
“This all remains subject to further negotiations, with no certainty as to whether Intu will achieve a standstill, or on what terms or for what duration. Further announcements will be made as appropriate.”
