The UK’s biggest shopping centre owner looks increasingly likely to fall into administration on Friday, Sky News learns.
The survival prospects of Britain’s biggest shopping centre-owner diminished on Thursday night amid fading hopes that lenders would grant the company an eleventh-hour reprieve.
Sky News learnt that the prospects of a standstill agreement being reached between Intu Properties – which runs Manchester’s Trafford Centre – and a vast syndicate of banks have been all-but extinguished ahead of a Friday deadline.
A person close to the situation said it was now “90% certain” that Intu, which is saddled with £4.5bn of debt, would be forced into administration on Friday.
“There is a glimmer of hope, but only a glimmer,” the person said.
The collapse of Intu, which also owns the Metrocentre in Gateshead and Lakeside in Essex, would be arguably the most significant corporate casualty of the coronavirus pandemic so far.
It would underline both the changing shape of the UK’s retail industry and the shifting dynamic between retailers and their landlords.
While a last-minute stay of execution remained possible with talks between financiers set to continue throughout Thursday night, a rescue agreement between Intu and its lenders now appears highly unlikely.
Sky News revealed earlier this month that Intu had put KPMG on standby to plan for an insolvency process – a development that the company confirmed publicly on Tuesday.
In that statement, Intu said some stakeholders were pushing for a standstill deal to be shorter than the 18-month period its board was seeking.
It added that it was discussing with lenders the possibility of a future debt-for-equity swap, as well as the funding of individual shopping centres.
KPMG has asked creditors for £12m to enable it to run an orderly administration process.
Without that money, it said, “there is a risk that centres may have to close for a period”.
Intu directly employs nearly 3,000 people, but is a disproportionately important player in many of the UK’s regional economic centres, with a further 102,000 people working in its 17 UK shopping centres.
Another 30,000 people work in Intu’s broader supply chain.
Its collapse would involve one of the most complex administrations seen in Britain’s property industry for years – and spark fears for a wider commercial real estate sector which has been ravaged by the coronavirus crisis.
This week, it appeared that less than 15% of the quarterly rent bill owned by high street and other tenants had been paid, underlining the scale of the crisis engulfing vast swathes of the economy.
The COVID-19 pandemic has prompted a vast chunk of Britain’s retail industry to withhold rent payments, with names such as Sir Philip Green’s Arcadia Group, Boots The Chemist, New Look and McDonald’s choosing not to pay landlords.
Intu has a complex corporate structure, with its shopping centre assets owned by separate special purpose vehicles against which the listed parent company borrows money to fund its operations.
The company has about £4.5bn of debt, but a market capitalisation at Thursday’s closing share price of barely £52m.
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It is one of the London stock market’s worst performers, with its shares down almost 90% during the last year, and equity investors face being wiped out if it collapses as early as Friday.
Even if the listed parent company is forced to appoint administrators, the implications for its individual assets are far from clear.
Rival operators are likely to pursue Intu’s prized assets to take them over, although securing alternative managers of large shopping centres as the retail sector attempts to recover from COVID-19 would be an uncertain process, according to insiders.
Some people close to the company continued to believe on Thursday night that lenders would step back from the brink because of the value destruction that would occur from Intu’s collapse.
Intu’s fall from grace has been startling.
It was a constituent of the London stock market’s FTSE-250 index until last year.
Its largest shareholder is John Whittaker, the Peel Group magnate who sold the Trafford Centre to what was then called Capital Shopping Centres in 2011.
Mr Whittaker could emerge from a restructuring of Intu owning the Manchester shopping destination again.
Earlier this year, Intu tried to raise £1.5bn from an emergency equity-raising, but found its hopes dashed amid turmoil in financial markets caused by the developing coronavirus crisis.
The company recently brought in David Hargrave, a restructuring veteran, to oversee its efforts to stay afloat.
Intu declined to comment.