Intu still in talks on rescue but preparing for administration
Jun 23, 2020
Troubled property giant Intu issued an update on Tuesday that paved the way for the firm to go into administration should its talks with its creditors fail.
Whether those talks will fail or not remains open to question. The owner of Lakeside, Metrocentre and many other malls needs to reach a standstill agreement on debt owed to certain creditors by June 26 as existing problems at the company have been exacerbated by tenants not paying their rents during the lockdown.
But ahead of that deadline, Intu said that “notwithstanding the progress made with lenders, Intu has also appointed KPMG to contingency plan for administration.”
It added: “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.”
It said up to 17 malls could close in that eventuality, which would be devastating both for the company and many of its tenants that have only just been able to reopen.
The company said various issues are still being debated with its creditors, including the duration of the standstill agreement. Intu had requested 18 months, but some creditors are unhappy about agreeing to that length of time, even though Intu has said that it’s “not expected that the duration will exceed 15 months.”
And given that they’d be allowing Intu a lot of leeway if they agree to the standstill, they want something in return. The company said “the extent and basis to which creditors at the individual asset level will share (to the extent it exists after the repayment of debt, accrued interest and applicable break costs) in any future valuation recovery” is an issue on the table and could include converting debt to equity.
How the operations of individual centres are to be funded is another hurdle. The landlord said that it’s seeing lower rent collections at certain shopping centres due to 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”.
Getting additional funding in centres funded by bond structures “is more difficult to achieve and, in this connection, consent will be sought shortly from the stockholders of Intu Debenture PLC to authorise the trustee to release certain monies within the existing debt structure to be used for short-term liquidity needs. Other centres may also require cash injections for these purposes.”
The complexity of the situation partly reflects the complexity of the ownership set-up at Intu. But whatever happens, with Friday’s deadline approaching, things will become clearer within a few days at the most.
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