Intu Properties PLC (LON: INTU), the UK’s largest shopping centre owner, has fallen into administration after failing to come to an agreement with its lenders.
The Trafford Centre and Lakeside owner, which has net borrowings of more than £4.5bn, said its 17 sites will remain open and continue to trade.
The lockdown has meant many retailers have collapsed, other have looked to force rent reviews via CVAs and overall rent collection has plummeted for most retail landlords, and this week just 14% of the £2.5bn due was paid, according to data from Re-Leased.
Administrators from KPMG were called in on Friday afternoon and will look to sell off the properties.
Intu employs around 3,000 staff in the UK, with a further 102,000 working for the stores and outlets in its shopping centres.
Formerly a FTSE 100 company as recently as 2017, Intu’s shares having fallen from above 300p to around 33p at the start of the year, into single figure pennies since March and dropped 60% to 1.8p this week before being suspended just after 1.30pm on Friday.
Its shopping centres are each run by individual operating companies, which have or are expected to enter into transitional services agreements with the administrators to the group “to ensure continuity of service provision by the central entities to the individual shopping centres,” the company said.
Analysts at broker Stifel noted speculation in the media that a potential deal with lenders had been vetoed by one lender to the Trafford Centre, which was unwilling to accept the standstill conditions and wanted to take control of the Manchester mall itself.
But without the Trafford Centre being included in the group, the providers of the group’s revolving credit facility, being Barclays, Bank of America, Credit Suisse, HSBC, Lloyds, Natwest and UBS, would not give their support.
"It is now likely that the individual lenders on assets, or groups of assets, will take direct control and appoint their own asset managers,” the Stifel analysts said.
“This process could take three to six months and the lenders will need to continue financial support during that time in order to keep the assets operational."
Russ Mould, investment director at AJ Bell, said: “Already in a sorry state before coronavirus, the pandemic and effective shuttering of its sites has tipped it over the edge.”
They added: “Some of the factors which have led the company to this point have been out of its control, but others have been of its own making.
“A shift to online shopping has hit rental income and valuations at its out-of-town shopping malls and Covid-19 has clearly had a devastating impact.
“However, the business took on too much debt and in hindsight was buying up assets at the wrong time in the early to mid-2010s. The fact several suitors took a look at the business in the last couple of years before walking away should have set alarm bells ringing.
“The chances of a white knight riding to the rescue are practically non-existent at this point, with the future of Intu’s assets likely to be more akin to vultures picking over its carcass.”