Struggling UK retail REIT Intu has shelved plans for a £1-£1.5 bn (€1.2-€1.7 bn) equity raise to fix its balance sheet issues.
In a statement, the company said that 'while a number of Intu’s shareholders and potential new investors indicated their support for an equity raise, the board believes the current uncertainty in the equity markets and retail property investment markets precluded a number of potential investors from committing capital into the business'.
The board added: 'However, during this process, Intu received several expressions of interest to explore alternative capital structures and asset disposals.'
The news raised further doubts over the firm's prospects, after Intu announced last week that it had obtained a three-year extension to a revolving credit facilty worth £440 mln, contingent on the firm raising a minimum of £1.3 bn through a cash call.
With the equity raise now set aside, Intu apparently remains reliant on its current £600 mln facility, which is due to expire in October 2021. Overall, the firm is trying to chip away at debts of £4.7 bn to secure its future.
Trading update
Alongside the update on the equity raise, Intu published a detailed trading update for 2019 on its valuation and operational performance.
The firm's portfolio value fell by 22% on a like-for-like basis with a revaluation deficit of £2 bn, noted to have been driven by weak sentiment rather than transactional evidence.
Intu’s topped up net initial yield moved out by 95-bps to 5.93%, while its debt to assets ratio stood at 68% at 31st December 2019.
The company noted that a further 10% fall in asset values would lead to covenant cure requirements of £274 mln. Intu is currently in compliance with debt covenants but stated that by July 2020 it could be in breach of certain covenants.
Operationally, the business performed broadly in-line with guidance. Net rental income declined by 9.1% to £402 mln and the outlook for 2020 remains for continued declines but at a moderating rate.
'This out-turn was broadly anticipated by us even without the recent sell-off due to the Coronavirus,' said analyst Goodbody.
'The CEO notes that throughout the equity raise process, a number of alternative options have presented themselves for both the capital structure and further disposals which will be explored further...it is clear the outlook for Intu remains challenged,' Goodbody concluded.
