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UK mall owner Intu warns of administration
[LONDON] Intu Properties Plc warned that some of the UK's biggest shopping centers may have to close if its survival talks with creditors collapse, putting thousands of jobs at risk just as retailers emerge from the coronavirus lockdown.
The landlord has asked banks to waive terms on 600 million pounds (S$1.045 billion) of loans until the end of next year. If a so-called standstill agreement can't be reached before the Friday deadline, Intu said it will likely fall into administration, according to a company statement on Tuesday. And that could mean malls shutting their doors, at least temporarily.
Intu was already grappling with plunging rents and values for brick and mortar stores before the UK government ordered businesses to close to slow the virus outbreak. Now, with retailers unable or unwilling to pay rent amidst the crisis, the company and its 2,500 staff are on the brink.
"Intu's statement today could be a plea to its tenants that non-payment of July rent, due tomorrow, may shutter their stores," said Bloomberg Intelligence senior analyst Sue Munden.
As part of its efforts to protect businesses during the lockdown, the UK government has put a temporary ban on landlords evicting tenants that don't pay rent, raising the prospect that mall owners will collect a fraction of the money due.
Intu, which owns nine of Britain's 20 largest malls including the Trafford Centre near Manchester, has about 4.5 billion pounds of debt, most of which is secured against individual properties or groups of malls. It is seeking to negotiate breathing space with lenders that would involve them waiving certain breaches of loan terms as it attempts to ride out the storm and sell assets or raise capital to pay down debt. Lenders are unlikely to agree to a grace period of more than 15 months, the company said.
If Intu goes into administration, the property companies that take control of its shopping centers would have to pay the administrator up front for centrally contracted services, according to the statement.
"If the administrator is not pre-funded, then there is a risk that centres may have to close for a period," the company said.
Intu confirmed that it has appointed KPMG to its contingency plan for administration.
Lenders' ability to share in any potential increase of the value of the malls is another key discussion point, Intu said. The company wants additional funding to help keep the shopping centers running while rent collection is low and some rent is being held by lenders as security.
Intu's bonds guaranteed on the Metrocentre mall, due in 2023, are indicated at 50 pence on the pound, according to data compiled by Bloomberg.