Intu warns of breach in debt commitments as retail rents collapse | Business
Intu Properties, one of Britain’s biggest shopping centre owners, has said it will breach the terms on its debt commitments following a collapse in the rents received from its retail tenants unless it can secure debt waivers from its lenders.
The owner of the Trafford Centre in Manchester and Lakeside in Essex said it had received just 29% of rents due this month, compared with 77% a year ago.
It has already been hit hard by the collapse of a number of UK retail chains in the past two years and has amassed debts of £4.5bn. It said it would need to seek leeway from its lenders on its debt commitments: “The impact of the reduced rents received is expected to require us to seek covenant waivers and we are in constructive discussions with the relevant lenders.”
It is also seeking aid from the government’s £330bn coronavirus support package for businesses. “In these difficult times we continue to assess all strategic alternatives and will provide further updates as appropriate,” it said.
Intu said it had cut back on capital spending and other costs to preserve liquidity. The company has £184m in cash immediately available and expects to receive £95m from the sale of a Spanish shopping centre in mid-May.
It had to write down the value of its centres by nearly £2bn this month, which resulted in a £2bn annual loss.
Turmoil in stock markets forced the company to abandon a £1.3bn emergency cash call at the beginning of this month, and it signalled doubts about its future without new funding even before the coronavirus shutdown began to take effect.
Second-quarter rent payments were due on Wednesday. Many retailers struggled to pay after being forced to close stores because of the coronavirus outbreak. Primark, one of Intu’s tenants, has refused to pay £33m in rent. Burger King, which also has outlets in Intu shopping centres, has also refused to pay its latest rent bill.
The government has ordered all non-essential stores to close. Only essential stores such as supermarkets and pharmacies remain open.