Intu prepares for administration if bank talks crumble

The shopping centre owner has put professional services firm KPMG on stand-by as administrator, should it fail to renegotiate debt repayment terms with its lenders by 26 June.

‘Big Four’ consultancy KPMG and Intu Properties, which owns the Trafford Centre among other assets, both declined to comment on the news reported in national media at the weekend.

It is understood that KPMG has been hired as part of contingency planning to help prepare the business in case discussions with banks to secure a ‘standstill agreement’ on existing loan payments are unsuccessful.

Last month, Intu issued a request to postpone certain debt obligations for a maximum period of 18 months as part of efforts to “fix [the company’s] balance sheet over the medium term”.

The mall owner is struggling due to market uncertainty over the Covid-19 pandemic, which has hit retail revenues and rents and compounded its already dicey financial situation.

London Stock Exchange-listed Intu is saddled with around £4.5bn in debt. It reported £2bn of losses for the 2019 financial year and appointed a restructuring officer last month to help it improve its financial position.

Intu said in a filing in May that the standstill agreement was intended to provide “relief from financial covenant testing, debt amortisation and facility maturity payments for a period through to no later than 31 December 2021”.

Without its lenders’ agreement, a waiver that expires on 26 June would likely cause the company to fall into administration.

It is understood that putting KPMG on standby is part of the management team’s strategy to prepare for all possible outcomes, and that KPMG has not yet formally been appointed as administrator.

Because of this, Intu is not obliged to issue any announcement on the move to the stock exchange. A decision on whether to place the company into administration is, however, expected within a fortnight.