Trafford Centre owner Intu Properties has dropped plans for a £1bn-plus equity raise due to lack of investor interest, and is exploring alternative options to raise financing, including selling assets.
The shopping centre landlord has been hit by challenging retail conditions and was hoping to raise between £1bn and £1.5bn of equity to fix its balance sheet and help pay down £4.5bn in debt.
However, the company was unable to drum up sufficient interest from shareholders and potential new investors and “concluded it is unable to proceed with an equity raise at this point”, it said in a filing to the London Stock Exchange, where its shares are listed, on Wednesday.
“The board believes the current uncertainty in the equity markets and retail property investment markets precluded a number of potential investors from committing capital into the business, and Intu was therefore unable to reach the target quantum at the current time.”
The failure to instigate the equity raise means Intu has missed the criteria set by its banks to grant a new four-year £440m revolving credit facility. This means the company risks breaching certain bank covenants when they expire next summer, the statement added.
Intu’s shares were down 40% this morning, reaching an all-time trading low. Last month, the company’s value dropped from £2.8bn in November 2018 to £164m when it confirmed that investment talks with Hong Kong-based Link Real Estate Investment Trust, alongside existing shareholder Peel Group, had fallen through.
The company noted today that, despite the lack of interest in an equity raise, it had received several expressions of interest to explore alternative capital structures and asset disposals.
“Accordingly, Intu will continue and broaden its conversations with stakeholders [to discuss] the range of options available to the company… and to utilise its assets to provide further liquidity,” the statement said.
“These include alternative capital structures and solutions and further disposals. Intu will also keep under review the feasibility of an equity raise.” The statement did not detail which assets it may earmark for sale in the coming months.
Intu’s portfolio comprises 14 shopping centres across the UK, including the Trafford Centre in Greater Manchester.
Intu chief executive Matthew Roberts said: “We remain focused on fixing our balance sheet in the near term to ensure that this business has the financial footing it needs to realise its significant potential.
“While it is disappointing that the extreme market conditions have prevented us from moving forward with our planned equity raise, I am pleased that a number of alternative options have presented themselves during the process which we will now explore further.”
In a trading update issued alongside the filing, Intu said footfall across its shopping centre portfolio increased by 0.3 per cent in the full-year 2019, and by 0.9 per cent year-on-year in the first eight weeks of 2020.
Full year 2019 like-for-like net rental income in line with the guidance given in the November 2019 trading update, down by 9.1 per cent.
Roberts added: “We have a concentrated and well-invested portfolio of many of the UK’s best retail and leisure destinations where both shoppers and customers want to be.
“Operationally our business is strong, delivering a resilient rental performance despite ongoing pressure from CVAs and administrations, with stable occupancy rates and footfall that consistently outperforms the benchmark.”
Intu’s audited 2019 annual results are due to be published on Thursday 12 March.