Company takes steps to avoid bondholders taking control of assets including shopping centres.
Intu has been under threat of losing some of its key retail properties as bondholders reportedly drew up plans to take control of the company’s assets. Law firm Clifford Chance and investment bank Moelis & Company have been appointed to advise on £1.3b of debt secured against parts of Intu’s retail property portfolio, with some of the company’s 14 shopping centres in the UK at risk of seizure. Lakeside in Essex, Braehead in Glasgow, Watford in Hertfordshire and the Victoria Centre in Nottingham could potentially be seized if Intu breaches debt covenants.
The shopping centre owner acknowledged that an upcoming breach was likely, after it received less than one-third of UK quarterly rent payments in March. Plummeting shopping centre valuations have put pressure on loan-to-value ratios and retail tenants are struggling to pay rent as they face up to the effects of enforced closures due to the Covid-19 pandemic.
However, Intu has now warned that it is prepared to take “robust action” against “well-capitalised” tenants that refuse to pay rent during the coronavirus crisis. The company said: “There are a very small number of cases where customers are not currently engaging with us to find a consensual solution – these are large, well-capitalised brands who have the ability to pay but have chosen not to. In these instances, we are prepared to take more robust action to enforce the legally binding terms of those leases.”
The company has also agreed a waiver on potential breaches of its revolving credit facility until 26th June and hopes that lenders will consider agreeing to a further standstill agreement during the present period of market uncertainty.
To make further savings, Intu has furloughed around 60% of staff at shopping centres and 20% of head office employees, and the board will take a 20% salary cut for the next three months. The company has also identified £3m in short-term cost savings, according to its most recent update.
