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The novel coronavirus seems to have become one of the synonyms of devastation and bankruptcy, which has impacted almost all the industry segments and the story of shopping centre around the United Kingdom is no different, as the lockdown imposed by the government has pushed the shopping operations into a complete halt for last almost two months. UK retail and the shopping centres are now facing the challenge related to cash flow and revenue generation, which consequently is impacting the property owners as they are not able to pay the rents. The United Kingdom government had ordered all retail companies and shopping centre to close their operations to avoid the spread of novel coronavirus.
The prevailing situation has led the property lobby groups to enter into discussion with the treasury about the fears. In a meeting which took place towards the end of March, the group urged the government to provide relief package for property-owners as many of the companies were unable to give the interest payments on their debt. They tried to persuade the treasury of the United Kingdom to provide the fund to the property-owner companies.
Retail and departmental stores were struggling even before the outbreak of the coronavirus, as the demand was not picking up due to Brexit and election-related uncertainties and many of the top names were touted to fall under administration, but once the pandemic started spreading and the lockdown was in place with essential retailers such as supermarkets and pharmacies only in operations, the situation went bad to worse. All the retailers were fending to save whatever they can, and many of them stopped paying rent; it was reported that only about 30 per cent of the rent was received by the property owners. Intu which was already struggling due to cash crunch had earlier reported that it received only around 29 per cent of the April-June quarter rent. Not only its high-profile tenants like Debenhams and Primark, but many others have also said that they have no intention of paying rents now due.
All these circumstances led the company to announce in the latter part of March that it may not oblige its terms on its debt obligations. The company which has already been struggling with the collapse of several UK retail chains was having cumulative debts of £4.5 billion in just over two years. The company was already was looking for support from the government’s £330 billion coronavirus support package for businesses. The company though had been working proactively for preserving cash and has been cutting cost, with cash of around £184 million and £95 million expected from the sale of a Spanish shopping centre. But now Intu Properties was looking for termination of contracts from its lenders as it was struggling for existence after a delay in rent payments from retailers.
Intu Properties Plc through an update on lender deliberations, announced a abdication on 1st May 2020, regarding its RCF (Revolving Credit Facility) until 26th June 2020, in which the company declared that it was increasing its arrangement to major investors of the company at the asset level as it deliberated on all possibilities.
As the company was engaged in talks since then, it came up with an update on plans for medium-term to fix the balance sheet. The company pointed that substantial market ambiguity would continue related to the impact of novel coronavirus on the business of Intu's centres which barring the necessary stores, remain almost shut till at least 1st June 2020. Additionally, the company is not sure about the possibility that the lockdown in the United Kingdom would finally be removed and since when. Due to this, the company's rental valuation as well as collections at the end of second quarter (June 2020) are expected to result in fissures of contracts or material liquidity urgency, if any such fissures are to be dealt with in agreement with the financing documents during that period.
The company stated at the present situation and with its primary focus to maximise value, to address this situation, standstill-based agreements with pertinent financial stakeholders across its structures, at both the group and the asset level, are the best possible option, as these standstill contract would request debt amortisation, financial bond testing and facility maturity payments for a period not earlier than 31st December 2021. This option would also seek to pursue self-finance operational and financial expenses across the various property-owning sub-propositions.
Hence the company has sought debt standstill and would reportedly engage in talks with financial institutions, including HSBC, Lloyds, Bank of America, Barclays, Credit Suisse, NatWest and UBS. The talks also include bondholders and financiers on individual properties.
However, the rent collection has increased from 29 per cent on the due date, and the company stated that it had collected 40 per cent of the outstanding rent by the end of March. It is also planning to deal stringently with the well-financed retailers who are not paying the rent.
Overview of the Intu Properties Plc
Intu Properties Plc (LON:INTU) manages and owns shopping centres and have a multichannel existence. The company has twenty centres across the United Kingdom and Spain. There are around 400 million visits to the shopping centres of the company in a year. The company's whole business is concentrated on generating the best places for shopping and leisure so that people can come frequently and stay longer.
INTU – Share Price Performance
(source: Thomson Reuters)
The stock price of the Intu Properties Plc increased by 7.48 per cent or 0.31 points to GBX 4.46 on 19th May 2020 at around 08:23 AM GMT. The current stock price was showing a gain of 43.52 per cent from the 52-week low of GBX 3.10 set on 23rd March 2020, however it was down by 95.49 per cent from the 52-week high price of GBX 99.0 set on 21st May 2019.
As on 19th May 2020, the Market Capitalisation and Share Outstanding of the company have been reported to be at GBP 56.18 million and 1.36 billion, respectively. The beta of the company is reported at 1.95, which shows higher volatility as compared to the benchmark index.
