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Shopping centre giant Intu wans malls may close as it braces for administration
23 June 2020, 08:42
Intu Properties the owner of the Lakeside Centre and Manchester's Trafford Centre has warned it may have to close if it calls in administrators amid crunch talks.
The property company said it has put city administrators KPMG on stand-by as it holds negotiations with lenders ahead of a deadline on Friday.
The company was already experiencing huge debt troubles as it went into the coronavirus crisis, with stores then forced to close and shop owners demanding rent holidays, which has further impacted on the group's operations.
Intu is hoping to arrange a so-called standstill agreement on terms of up to 18 months, but said that at this stage it is unlikely to be more than 15 months.
However, the company has warned "there is a risk that centres may have to close for a period" if an agreement cannot be reached for upfront funding from lenders.
It emerged earlier this month that KPMG had been appointed to make contingency plans for Intu's administration.
Intu is thrashing out details of a possible agreement with lenders before June 26, when covenant tests are due on its lending deals.
Given the impact of the coronavirus crisis on shopping centres, which were forced to close for nearly three months amid the lockdown, the business is likely to fail these covenant tests.
It is also due for updated valuations of its shopping centres this month, which could see it breach lending agreements, given woes in the sector.
Intu said talks are focusing on the length of a possible standstill, how much creditors could share in any future upside in shopping centre valuations, as well as changes to how shopping centres are funded to allow them to pay for staff, such as security and health and safety.
It said: "Some centres have reduced rent collections as a result of Covid-19 and cash trapped under their financing arrangements which restrict their ability to pay for support, such as shopping centre staff, from other entities in the Intu group."
If this cannot be secured, then malls may be forced to shut, it warned.
Intu said: "In the event that Intu Properties plc is unable to reach a standstill, it is likely it and certain other central entities will fall into administration.
"In this situation, all property companies would be required to pre-fund the administrator to provide central services to the shopping centres.
"If the administrator is not pre-funded then there is a risk that centres may have to close for a period."