March 4, 2020 / 7:22 AM / in 25 days

Shopping center owner Intu fails to secure vital funding

(Reuters) - One of Britain’s biggest shopping mall operators, Intu Properties, has failed to secure vital new funding and said on Wednesday it was in danger of breaching debt commitments due in July because of the tough climate for UK retailers.

FILE PHOTO: A general view shows the Trafford Centre shopping centre in Manchester, Britain, November 7, 2019. REUTERS/Jon Super/File Photo

Shares in the London-listed firm (INTUP.L), which owns Manchester’s Trafford Centre, Lakeside in Essex, and another 18 properties in Britain and Spain, fell 30% to a record low at 1410 GMT.

Intu said it would seek other sources of financing, including looking at selling assets, and take mitigating actions which may include negotiating debt waivers where appropriate.

The company was stuck with a 4.5 billion pound ($5.77 billion) debt pile at the end of 2019 and had planned to raise between 1 billion and 1.5 billion pounds to shore up its balance sheet after being hit by high-profile failures in the retail industry and rent renegotiations.

At its peak in 2006, Intu had a market value of nearly 13 billion pounds which had plummeted to around 81 million pounds on Wednesday.

It had been in talks for new equity funding with its largest shareholder John Whittaker’s Peel Group and also with new investor Hong Kong-based Link Real Estate Investment Trust.

Having made a 2.9 billion pounds approach for the company in 2018, Whittaker later walked away. Rival Hammerson (HMSO.L) also abandoned a 3.4 billion pounds takeover offer in 2018.

“The board believes the current uncertainty in the equity markets and retail property investment markets precluded a number of potential investors from committing capital into the business,” it said in a statement, adding: “Intu will continue and broaden its conversations with its stakeholders.”

Intu has been hit by company voluntary agreements - an insolvency procedure used by retailers to force renegotiation of leases - from brands including Debenhams, Toys R Us, House of Fraser and HMV.

Other retailers are increasingly shifting online to cut costs.

“If the high street cannot be revived, into the experience shoppers desire, it is likely other large shopping centers could follow suit,” said insolvency director Chris Horner at Business Rescue Expert.

Intu, which also owns the out-of-town Merry Hill center, said it had nearly 190 million pounds of debt due to be repaid or refinanced within the next 12 months.

Its combined credit score, which measures on a rising scale of 1 to 100 how likely a company is to pay its debts in the next year, is “1”, Refinitiv Eikon data showed, indicating it is expected to default.

The company said that, apart from the challenges caused by tenants going bust, its income has been “resilient in what has been a challenging year for retail and retail property”.

Footfall at its centers through the first eight weeks of 2020 increased by 0.9% compared with the same time last year, but occupancy at the end of last year fell to 95% from 97% in 2018 due to store closures.

It pushed back its full year results announcement to March 12 from March 5.

Reporting by Yadarisa Shabong in Bengaluru; Editing by Patrick Graham and Elaine Hardcastle

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