Intu Properties Plc Could Be The Latest Causality Of The Coronavirus Lockdown

  • Jun 24, 2020 BST
  • Team Kalkine
Intu Properties Plc Could Be The Latest Causality Of The Coronavirus Lockdown

 Summary

  • The company warns that it might fall into administration as its debt is mounting
  • Its property income fell sharply due to the lockdown, whereas its attempts to raise funding of £1 billion failed
  • Collapse of high street retailers is the reason sighted for its financial troubles                   

The impact of the coronavirus pandemic has been felt hard by the retail companies in the United Kingdom. Several high street retail chains have shut their shops or are contemplating doing so shortly.  Owner of many of these high street properties Intu Properties Plc is a very troubled business these days. The company has come out with an update for its shareholders this week saying that it is on the verge of a collapse. The company has been trying for a financial rescue of its lenders but has been unable to do so. It has now engaged KPMG to plan for administration in case the talks fail. The company which owns some of the largest shopping centres in the country like Trafford Centre and Lakeside has seen most of its stores shut down during the lockdown excepting for the ones selling essentials.

Financial troubles

Even before the pandemic hit the UK, Intu properties had been struggling financially. Till January 2020 the company had been facing a challenging market environment due to the negative headwinds emanating out of the pre-Brexit jittery. Many of its customers were delaying their decisions and waiting for the business conditions to improve before taking shops on rent. In the year 2019, the company had suffered a loss of £2 billion, and currently, it has a debt burden of £5 billion in its books, which is up for maturity by early 2021 and needs urgent refinancing.

After the lockdown was imposed, the company received some government support in the form of stimulus spending to support businesses in the country. Intu was able to place nearly 60 per cent of its shopping centre staff and 20 per cent of its head office staff under the benefit of that scheme. However, it has not been able to avail of the government loan facility to fulfil its debt obligations, which is the reason why it is on a lookout for a fresh lending support.

Earlier this year in January also the company had initiated discussions with debtors to raise funds of up to £1 billion and also sell some of its assets, to retire off some its debts and also bring in some cash to meet its working capital requirements. Since then the company was able to sell off a property in Zaragoza in Spain, but not much headway could be made with regards to raising money.  Currently, the company is in discussions with its lenders to allow a moratorium period of 15 to 18 months for the repayment of capital and interest. Whether the company will fall into administration or not is highly contingent on these discussions.

Intu Properties PLC

Intu Properties PLC (LON: INTU) is a United Kingdom domiciled real estate investment trust (REITs) which owns and manage some of the largest and most popular retail properties across the country as well in Spain. Headquartered in London, the company has a growing multi-channel presence and an expanding portfolio of properties in Spain, which are leased for retail and leisure purposes or for commercial activities. The operations of the company are categorised into two geographical segments, namely Britain and Spain. It either fully or partly owns seventeen properties in the United Kingdom and three in Spain (out of which one was sold out this year). The company’s client list includes some of the most popular names like Harrods, Zara, H Beauty and AliExpress.

The shares of the Intu Properties are listed and traded on the London Stock Exchange and on the Johannesburg stock exchange in South Africa. On the London Stock Exchange, they are listed in the premium main market segment, where the shares of the company are identified and traded with the ticker name INTU. The company shares also form part of the FTSE All-Share Index at the London Stock Exchange. 

Stock Price movement on LSE since the market update was given by the company

The share prices of Intu Properties Plc had plunged since June 23 when the debtor discussion announcement was made by the company. At the opening of the market on June 23, the shares of the company were trading at GBX 4.51 and on 24 June, at 1.05 PM, GMT+1 the shares were trading at GBX 4.10 losing over 9.0 per cent over the period.

Outlook

During the past three months, the UK retail industry has given its worst performance in decades. Several retail companies are on the verge of bankruptcy, and several others are actively making the transition from shop floor based retailing to online retailing. Since the opening of the lockdown also very slow pace in business growth is being witnessed because of the stringent social distancing measures, which is expected to keep the industry subdued for some more months. The next few months thus are going to be very difficult for the property owners as they might witness a very high turnover in their tenancies. 

The current stimulus measures have brought some relief to Intu Properties, in that it did not lose much of its staff and is also able to enjoy the benefits of the government furlough scheme for few more months.

There is a possibility that the company might be able to convince its creditors to extend repayment moratorium for 15 to 18 months. It would not be beneficial for the creditors to take the company into administration at this time as the market conditions are subdued and they won't get a good price for its properties.  The company would also benefit from the recent announcement of the government to relax some of the country’s bankruptcy laws so as to protect a large number of companies in the country from going burst. The appointment of KPMG by the company to plan for administration also seems to be precautionary move.

 


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