Shopping centre operator Intu has warned that it is likely to breach its debt covenants by the end of June unless lenders agree to arrangements that allow it to ride out the coronavirus crisis.
The owner of properties that include the Trafford Centre in Manchester and Gateshead’s Metrocentre has been struggling with a massive debt pile and the crisis in the retail and casual dining sectors that has seen many outlets in its mall close down.
The company has been trying to pay down debts of almost £4.5bn through offloading assets and recently sold one of its shopping centres in Spain.
But efforts to bring down debt have been scuppered by the coronavirus lockdown, which has led to the company losing more than half the rent it was due in the first quarter of the year.
Now intu has released a statement which says it is seeking a “standstill” on its debts until the end of the year, adding that such arrangements would give it stability “to explore alternative capital structures and solutions and disposals to ultimately fix the balance sheet.”
A statement from the company said: “Significant market uncertainty remains regarding the impact of Covid-19 on the operations of intu’s centres which, with the exception of essential stores, remain semi-closed until at least 1 June 2020. Additionally, at this time, the speed of recovery once the UK comes out of lockdown remains unclear.
“The resulting impact on rental collections and valuations at the end of June is likely to result in breaches of covenants or material liquidity requirements if any such breaches are to be cured in accordance with the financing documents at that time.
“This market backdrop, where the investment market is effectively closed, also creates material uncertainty for any asset disposal or additional funding process which intu might pursue to address these covenant issues.
“intu believes that in order to provide a stable environment in which to address this situation, standstill-based agreements with relevant financial stakeholders across its structures, at both the asset and the group level, are the best course of action and its primary focus to maximise value.”
Intu’s statement added that there could be no certainty that it could reach standstill agreements with its lenders and would deal with breaches of its finance agreements it they occurred.
The company owns shopping centres that include Eldon Square in Newcastle, St David’s in Wales, Merry Hill in the West Midlands and Intu Derby.
Intu’s troubles come as recent figures showed that retailers saw the sharpest decline in sales on record last month as people stayed at home due to the coronavirus lockdown and food sales cooled.
The monthly BRC-KPMG retail sales monitor for April revealed that total sales plummeted 19.1% after non-essential stores were forced to shut their doors in the previous month.
However, food sales also dipped lower in April, compared with the same month last year, as stockpiling subsided.