Intu Properties seeks standstill agreements with creditors to avoid default

By: Wajeeh Khan
Wajeeh Khan
Wajeeh is an active follower of world affairs, technology, an avid reader, and loves to play table tennis in… read more.
on May 18, 2020
  • Intu Properties says it might not be able to meet its debt commitments in June.
  • The real estate company is seeking standstill agreements with creditors to avoid default.
  • With a debt of £4.69 billion in 2019, the firm recently furloughed 80% of its workforce.

In an announcement on Monday, Intu Properties (LON: INTU) said that it might not be able to meet its debt commitments next month. The company cited falling rental payments and expressed plans of negotiating with creditors over standstill agreements to cushion the economic blow from COVID-19.

Earlier in May, Intu announced to have received debt waivers until 26th June. The real estate investment trust company is now seeking standstill agreements to pause repayments of debt facilities. Intu, however, expressed confidence that the delay will not go beyond December 2021.  

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The Manchester’s Trafford Centre owner will be the first in high-profile real estate businesses to have announced risk of default due to the Coronavirus pandemic. The initial response to the news was a 19% decline in the company’s shares on Monday. Later in the day, however, Intu recovered its losses to trade 4% higher in the stock market.

The Lakeside owner has so far seen a 90% decline in its market capitalization in 2020.

Intu Properties is not eligible for CCFF

Property owners in the UK like Intu, British Land, and Hammerson have taken a massive hit due to the ongoing health crisis that has pushed thousands of tenants into closing stores. Numberless retailers have reported an inability to pay rent in 2020.

In a bid to shore up finances, Intu had divested a few of its struggling properties in Spain and Britain last year. Owing to the rising Coronavirus uncertainty, the company added, it is unlikely for it to sell more properties or secure new financing to meet its debt commitments.

As per Intu’s spokeswoman, the real estate firm is not eligible for CCFF (COVID Corporate Finance Facility). The government scheme only supports large-cap companies that were financially strong before the outbreak.

Intu Properties reported £4.69 billion in net debt in 2019

In 2019, Intu Properties reported £4.69 billion in net debt while its losses surpassed £2 billion. Even before COVID-19, the future of the company without new funding already met with doubts in March.

Previously, the UK-based company had appreciated government measures, including tax payment deferrals, employee cost support, and business rates suspension as it hoped to see a positive impact on its financial performance.

In an attempt to cut costs, Intu has so far furloughed 80% of its workforce comprising of 2,600 employees in Spain and the UK combined.

At the time of writing, Intu Properties is valued at £60.46 million.

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