The Trafford Centre’s troubled owner is in discussions with lenders to reach a standstill agreement on certain debt payments while the retail market rides out uncertainty caused by the Covid-19 pandemic.
The move, intended to postpone or amend the terms of certain debt obligations, is the latest in a string of recent actions from the company as it attempts to “fix [its] balance sheet over the medium term”, the company said in a statement to the London Stock Exchange.
The mall owner is grappling with around £4.5bn in debt. It reported £2bn of losses for the 2019 financial year and appointed a restructuring officer earlier this month to help it improve its financial position.
The statement today said that Intu was in talks with its lenders and was requesting a standstill arrangement to provide “relief from financial covenant testing, debt amortisation and facility maturity payments for a period through to no later than 31 December 2021.”
In March, Intu said it received 29% of quarterly rents due compared to 77% the previous year. The ongoing impact of the pandemic on the company’s ability to collect rent from its tenants, and on valuations of its retail properties is likely to result in “breaches of covenants of material liquidity requirements”, by the end of June, it said today.
A payment holiday is required to avoid such breaches, Intu added. “The best way forward is achieving stability through a standstill until the market dislocation has stabilised,” the statement said.
“When market dislocation has passed, there will be greater opportunity to explore alternative capital structures and solutions and disposals to ultimately fix the balance sheet.”
Due to the current market conditions, which have seen the vast majority of Intu’s assets remain closed, the firm has been unable to explore methods of fixing the balance sheet such as asset sales and equity raises.
“This market backdrop, where the investment market is effectively closed, creates material uncertainty for any asset disposal or additional funding process which Intu might pursue to address covenant issues,” the statement added.
Intu’s share price was down 0.32% this morning.