May 18, 2020 / 7:00 AM / 8 days ago

UPDATE 2-Lakeside owner Intu seeks debt standstills to avoid default

* Intu says likely to breach covenants at end June

* Shares were down as much as 19% before turning positive

* Brokerage Liberum says co will collapse without govt aid (Adds shares, analyst comment, background)

By Yadarisa Shabong

May 18 (Reuters) - Struggling mall operator Intu Properties Plc warned on Monday it would likely breach its debt commitments at the end of June due to falling rental payments and will seek standstill agreements with creditors to ride out the coronavirus crisis.

The owner of Manchester’s Trafford Centre and Lakeside in Essex, Intu secured debt waivers until June 26 earlier this month and it said it was now proposing standstill agreements that would allow it to halt testing and repayments of debt facilities until no later than December 2021.

While Intu was already concerned about its financial prospects earlier this year, it would be among the first high profile victims in the property world of a crisis that has led to frantic discussions between tenants and landlords.

“To provide a stable environment in which to address this situation, standstill-based agreements with relevant financial stakeholders ... are the best course of action,” the company said in statement.

Shares of the FTSE small cap firm initially fell as much as 19% as investors weighed the risks of a default and the benefits of a potential debt standstill, before recovering to trade around 4% higher on the day at 4.4 pence.

Almost 90% has been wiped off the company’s market value so far this year.

British retail property owners like Intu, Hammerson , British Land have been hammered by the health crisis, which shut thousands of tenants’ stores and forced some into administration. Many retailers have said they are not currently paying their rent.

LENIENCY

Having disposed of some properties in Britain and Spain over the past year to prop up finances that were already under pressure, Intu said that given the current investment climate it remains uncertain that it would be able to secure new funding or sell more properties to address its covenant issues.

“Despite today’s update, we continue to believe the company does not survive without government help,” analysts at Liberum said in a note.

The British government has generally encouraged businesses to show leniency towards partners driven into trouble by the novel coronavirus.

A spokeswoman for Intu said the company does not have access to the government’s COVID Corporate Finance Facility (CCFF), which offers a lifeline to large firms that can prove they were in sound financial health before the pandemic.

With net debt of 4.69 billion pounds ($5.68 billion) and losses of over 2 billion pounds in 2019, the company in March raised doubts about its future without new funding, even before the coronavirus shutdown.

Intu earlier said that it expected a positive impact from government measures including business rates suspension, employee cost support and tax payment deferrals.

Intu has furloughed 80% of the 2,600 people it employs across its centres in the United Kingdom and Spain. ($1 = 0.8260 pounds)

Reporting by Yadarisa Shabong in Bengaluru; Editing by Patrick Graham

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