As a June deadline looms, preparations are in place for an insolvency process.
Shopping centre owner Intu Properties has put KPMG on standby in a move agreed in the last few days. The company has been forced to accelerate its contingency planning as it reaches a crucial deadline that could determine the company’s future. KPMG is poised to handle an insolvency process, should lenders refuse to agree to a temporary pause on debt repayments.
Intu Properties has requested an 18-month standstill to grant relief from covenant tests and payments on debt facility maturities. The banks’ agreement would prevent a waiver that expires on June 26th triggering the company’s collapse into administration. The board is optimistic that the negotiations will be successful and safeguard the jobs of its employees.
The company has recently published figures demonstrating that a standstill agreement would leave it with enough cash to continue operating, after receiving less than a third of the cash owed by retail tenants in March, when many struggling tenants withheld rent payments.
Without an agreement, however, Intu could be declared insolvent in under two weeks, triggering one of the most complex administrations in Britain’s property industry for years. Intu has a complex corporate structure, with 20 shopping centre assets owned by separate special purpose vehicles, against which the listed parent company borrows money to fund its operations. If the listed parent company is forced to appoint administrators, the implications for its individual assets are far from clear.
The company has about £4.5bn of debt and has been performing poorly on the London stock market, with shares down almost 90% during the last year.
The group is a major player in the retail sector, employing nearly 3,000 people directly. A further 102,000 people work in its 17 UK shopping centres, and it is estimated that another 30,000 people are employed in the broader supply chain.