Intu Properties, the owner of UK shopping malls including the Trafford Centre in Manchester, warned on Thursday that it could go bust if it is unable to raise further liquidity.
The debt-laden retail giant posted a loss of £2 bn in 2019, up from £1.17 bn the year before. The figure was mostly a result of writedowns in its shopping centre portfolio which shed 23% of its value or nearly £2 bn over 2019. Intu’s portfolio is currently valued at £6.6 bn, down 33% from a peak in December 2017.
Top priority
With a debt to assets ratio reaching 68%, the company flagged a ‘material uncertainty in relation to Intu’s ability to continue as a going concern’. However, it said it still had options to raise liquidity, including selling off more assets, refinancing its £4.5 bn debt and negotiating with its lenders.
‘Fixing the balance sheet is our top priority,’ said Intu’s chief executive officer Matthew Roberts in a statement. ‘Although we were unable to proceed with an equity raise, we have a range of options including alternative capital structures and asset disposals to provide liquidity.’
Intu was forced to abandon an emergency cash call last week because ‘extreme’ market conditions left it unable to raise its minimum target of £1.3 bn from investors.
The company will also seek ‘to negotiate covenant waivers where appropriate’. ‘These would address potential covenant remedies and the upcoming refinancing activities, with the first material debt maturities in early 2021,’ he added.
Net rental income dropped by nearly 11% to £401.6 mln at year-end 2019, or 9.1% on a like-for-like basis, mostly as a result of retailers’ administrations and CVAs but also due to the continued weak consumer confidence from the political and economic uncertainty in the UK.
Possible pandemic impact
Intu said it expects its net rental income to fall further this year on a like-for-like basis, but by a lower amount than in 2019. It is closely monitoring the impact of the coronavirus pandemic on its centres, but said the number of visitors was broadly unchanged in the first 10 weeks of 2020.
Analysts do not share Intu’s positive view on future income, particularly due to the rapidly evolving Covid-19 situation.
‘Intu’s management believe valuations in 2020 “should start to stabilise”. I do not share their optimism, especially given the great unknown of Covid-19,’ comments Colm Lauder, real estate analyst at Goodbody. ‘The main concern at present will not be the footfall impact of online sales, but the impact from Covid-19.
The company owns 20 shopping centres in the UK and Spain. It sold almost £500 mln of assets last year and recently offloaded Intu Asturias in the Spanish town of Oviedo for €290 mln.
