UK mall owner Intu collapses into administration as talks fail

London

BRITISH mall-owner Intu Properties has collapsed into administration after failing to agree to a reprieve from lenders.

The company, which owns nine of the United Kingdom's top 20 malls, has applied to appoint three administrators from KMPG, said a statement on Friday. The shopping centres will continue to trade, it said.

"Discussions have been ongoing with financial stakeholders to achieving standstill-based agreements," Intu said in the statement. "However, insufficient alignment and agreement in relation to the terms of such standstill-based agreements has been achieved with financial stakeholders."

Intu warned last Friday that it would likely appoint administrators after failing to align its myriad creditors, and was now considering how to protect stakeholders. Its shares, which are now suspended, tumbled almost 70 per cent in London.

Intu was already reeling from plunging UK store rents and collapsing values before the virus outbreak forced most of its tenants to close. The lockdown made things worse as retailers withheld rent and the pandemic shut off rescue options including a capital raise, as Intu sought to reduce its £4.5 billion (S$7.74 billion) debt pile.

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The administration threatens the jobs of about 2,500 Intu staff and of the thousands more who work in the stores inside its malls.

The company issued a warning last Tuesday, the day before rents for the next quarter were due, that it would require additional funding to keep the centres running in the event it was forced into administration.

The move paves the way for the potential sale of some of the UK's most-visited malls. The company's lenders have initiated talks with a range of asset managers to take over the running of its properties in the event it failed, React News reported last Thursday.

"There remains a danger of a fire sale by administrators that would cause negative ripples across the sector," Colm Lauder, an analyst at Goodbody Stockbrokers, wrote in a note to clients last Friday.

After obtaining an agreement to waive terms governing its revolving facility until June 26, the company tried to buy additional time by asking creditors to postpone covenant testing, debt repayment and maturity payments for loans coming due before the end of 2021.

Intu had appointed David Hargrave, a former partner in the re-structuring practices PricewaterhouseCoopers and Ernst & Young, as chief restructuring officer, in May to help negotiate with lenders.

It has also lined up KPMG as financial administrator in case it failed to reach a standstill agreement with creditors.

The company forecast in June it would collect 37 per cent less rent this year, after getting just 40 per cent of what it was owed for the second quarter.

Earlier in March, its auditors warned it may struggle to continue operating due to high debts and plunging asset values. The value of the company's properties has plunged by more than 30 per cent since their peak in 2017, as retailers underwent re-structuring processes that enabled them to shutter stores and slash rents in the face of growing online consumption.

That forced up Intu's relative indebtedness faster than the company was able to sell assets. BLOOMBERG