Shopping centre owner intu Properties has appointed the accountancy firm KPMG as administrator to make a contingency plan if it cannot reach an agreement with its creditors.
The property company, which owns several of the country’s top retail destinations the Trafford Centre in Manchester and Lakeside in Essex, confirmed last month it was seeking debt standstill agreements with some of its lenders as it battles for survival after a collapse in rental payments from retailers.
Intu is currently seeking a standstill agreement which would mean that the company would not have to pay back what it has borrowed until the end of 2021, and in addition, it is seeking a pay-if-you-can interest arrangement.
n the event that intu properties plc is unable to reach a standstill, it is likely it and certain other central entities will fall into administration. In this situation, all property companies would be required to pre-fund the administrator to provide central services to the shopping centres. If the administrator is not pre-funded then there is a risk that centres may have to close for a period.
The company’s official statement said that the main points of discussion in order to agree the standstill are:
- The duration of the standstill, with some stakeholders wanting a duration of less than 18 months. At this stage it is not expected that the duration will exceed 15 months
- The extent and basis to which creditors at the individual asset level will share (to the extent it exists after the repayment of debt, accrued interest and applicable break costs) in any future valuation recovery; and creditors of intu properties plc may also benefit (including possibly by way of future equitization of PLC debt)
- How the operations of individual centres are to be funded. Some centres have reduced rent collections as a result of Covid-19 and cash trapped under their financing arrangements which restrict their ability to pay for support (such as shopping centre staff) from other entities in the intu group. Securing additional funding in centres funded by bond structures is more difficult to achieve and, in this connection, consent will be sought shortly from the stockholders of intu Debenture PLC to authorise the trustee to release certain monies within the existing debt structure to be used for short term liquidity needs. Other centres may also require cash injections for these purposes.
These points of discussion all remains subject to further negotiations, with no certainty as to whether intu will achieve a standstill, or on what terms or for what duration.
The company has said further announcements will be made this week.