Intu’s (INTU) shares have been suspended and administrators have been appointed after the shopping centre landlord failed to secure a standstill agreement with lenders.
The group, which was once a constituent of the FTSE 100, had amassed net debt of £4.5bn and reduced rent income and plummeting asset valuations had left it in danger of breaching its covenants. While a waiver was announced in May, the board had been attempting to reach a standstill agreement with creditors, which would allow it to pause repayments until the end of 2021.
“Insufficient alignment and agreement” in relation to the terms of a standstill-based agreement had been achieved with financial stakeholders ahead of today’s deadline, the group said.
All shopping centres, which are held in separate operating companies, will continue to trade and no application has been made for the suspension of listing or trading of Intu’s five issued debt securities. However, the market has viewed it increasingly likely that some of that debt will be defaulted on. The price of its largest bond, backed by the Metrocentre shopping centre in Gateshead, declined almost a fifth over the past month alone, equating to an eye-watering yield of 21 per cent at the time of writing.
At the start of June, management revealed that it expected to collect 37 per cent less rent this year than in 2019, after receiving just 40 per cent of the rent due in respect of the second quarter. Meanwhile its debt-to-assets ratio stood at just under 68 per cent at the end of December, jumping from 53 per cent the prior year.
Management has been attempting to garner support for a rights issue at the start of the year but failed to gain sufficient investor interest - unsurprising given the structural challenges that had resulted in declining footfall and rental income.
It had also been targeting disposals in an effort to pay down some debt, but was hindered by a lack of appetite for the large retail assets that it was trying to shift.
However, Intu is not the only retail landlord whose disposal strategy has been thwarted by a lack of demand for larger scale retail assets. In May, Hammerson (HMSO) revealed that private equity group Orion had walked away from a £400m deal to acquire seven of its retail parks. The outbreak of Covid-19 has exacerbated the dwindling market for retail properties.
“Shopping centres are not at the top of many investors’ shopping lists at the moment,” said Knight Frank head of retail research, Stephen Springham.
