Intu talks fail, files for administration, malls stay open for now
Intu has become the most prominent corporate casualty of the coronavirus crisis in the UK with news on Friday that talks over its massive £4.5bn debt have failed and it has filed for administration, even though technically, the company would have had until midnight on Friday to strike a deal.
The future for the various assets that the company controls is unclear. Administrators from KPMG would most likely be seeking a buyer for the whole group but if one isn’t found, rivals are likely to be keen to snap up some of the individual malls, despite the problems currently seen in the UK retail and property sectors.
The company owns 17 malls and nine of them are among the top 20 shopping centres in Britain. Its properties are popular shopping locations and house a large number of flagship stores. Lakeside, for instance, was chosen by Harrods to unveil its new standalone beauty concept.
But there are fears that a ‘fire sale’ could be one way forward with malls sold at knock-down prices, something that could have a negative effect on the entire retail property sector. There are also concerns about finding people with the right skills to manage a large and complex retail property operation.
While Intu has carried massive debts for some years, it has been hit particularly hard in 2020 given that its ability to raise money to continue has been effectively blocked by the coronavirus crisis. This meant its only recourse was to get its lenders to effectively ignore the money it owes for a period of time.
The company had been hoping to achieve an 18-month standstill on that debt and has been in talks with its creditors. But in a stock exchange filing on Friday morning, it said that “discussions have continued with creditors in relation to the terms of standstill-based agreements. Unfortunately, insufficient alignment and agreement has been achieved on such terms”.
An administration filing was just about the only way forward. The company, which owns the Metrocentre in Gateshead and Lakeside in Essex had earlier warned that any administration filing could mean its centres closing temporarily if it didn’t have the £12 million in cash to pay the administrators upfront. But on Friday afternoon it said they would stay open for now.
Closures would have been devastating for the retailers that rent space inside them, coming after they'd only just reopened following the lockdown.
The company employs around 2,500 people but also has an extra 30,000 people working in its wider supply chain and more than 100,000 work in its centres overall, if you take into account all of those employed by its tenants.
The administration process would be fairly complex as the corporate structure of the company means that its shopping centre assets are owned by various different entities. The parent company, which is listed on the London stock exchange, is what brings them all together.
Other complications include situations like the Broadmarsh Centre where an £86 million revamp was under way, with work halted partway through in March when the country went into lockdown. The company also has revamp works in progress at Merry Hill and the Trafford Centre.
Intu’s £4.5 billion worth of debt is a massive amount for any company to owe and looks even bigger when you consider that it had a market capitalisation of only a little more than £24 million when share trading closed on Friday afternoon. Five years ago, it was worth over £4 billion.
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