Shopping centres may close if administrators brought in, warns Intu
Shopping centre owner Intu Properties has warned that its malls across the UK may have to close if it calls in administrators as it remains locked in crunch talks with lenders.
The group, whose properties include Braehead in Renfrewshire, the Trafford centre in Manchester and Lakeside in Essex, confirmed it has put KPMG on stand-by and is negotiating details with lenders as it looks to secure vital breathing space ahead of a deadline on Friday.
Intu is hoping to arrange a so-called standstill agreement on terms of up to 18 months, but said that at this stage it is unlikely to be more than 15 months.
It warned that if it cannot reach an agreement and is placed in administration, without critical upfront funding from its lenders “there is a risk that centres may have to close for a period”. Ross Greer, the Scottish Greens West Scotland MSP, said the news was “devastating” for Braehead workers and their families.
He said: “It will have a huge impact on the Renfrewshire and wider west of Scotland economy, and comes just a few weeks after Rolls Royce announced 700 job losses at its site literally just down the road.”
Itemergedearlierthismonth that KPMG had been appointed to make contingency plans for Intu’s administration.
Intu is thrashing out details of a possible agreement with lenders before 26 June, when covenant tests are due on its lending deals.
Given the impact of the coronavirus crisis on shopping centres, which were forced to close for nearly three months amid the lockdown, the business is likely to fail these covenant tests.
It is also due for updated valuations of its shopping centres this month, which could see it breach lending agreements, given woes in the sector.
Intu said talks are focusing on the length of a possible standstill, how much creditors could share in any future upside in shopping centre valuations, as well as changes to how shopping centres are funded to allow them to pay for staff, such as security and health and safety.
It said: “Some centres have reduced rent collections as a result of Covid-19 and cash trapped under their financing arrangements which restrict their ability to pay for support, such as shopping centre staff, from other entities in the Intu group.”
If this cannot be secured, then malls may be forced to shut, it warned. Intu said: “In the event that Intu Properties plc is unable to reach a standstill, it is likely it and certain other central entities will fall into administration.”