intu has warned that it will fall into administration later this week if it fails to reach an agreement with financial stakeholders across its structures ahead of the credit facility covenant waiver deadline of 26 June 2020. The shopping centre owner is looking to stabilise the business through standstill-based agreements.
This statement comes following an update on lender discussions that was issued by intu on 18 May 2020. In this earlier release, the company announced its plans to progress a standstill strategy with relevant financial stakeholders across its structures, at both the asset and group level, ahead of the revolving credit facility covenant waiver deadline of 26 June 2020.
This all remains subject to further negotiations, with no certainty as to whether intu will achieve a standstill, or on what terms or for what duration. Further announcements will be made as appropriate.
Notwithstanding the progress made with lenders, intu has also appointed KPMG to contingency plan for administration. 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. In this situation, all property companies would be required to pre-fund the administrator to provide central services to the shopping centres. If the administrator is not pre-funded then there is a risk that centres may have to close for a period.
In order to agree the standstill, points under discussion include:
- the duration of the standstill, with some stakeholders wanting a duration of less than 18 months. At this stage it is not expected that the duration will exceed 15 months
- the extent and basis to which creditors at the individual asset level will share (to the extent it exists after the repayment of debt, accrued interest and applicable break costs) in any future valuation recovery; and creditors of intu properties plc may also benefit (including possibly by way of future equitization of PLC debt)
- how the operations of individual centres are to be funded. 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. Securing additional funding in centres funded by bond structures is more difficult to achieve and, in this connection, consent will be sought shortly from the stockholders of intu Debenture PLC to authorise the trustee to release certain monies within the existing debt structure to be used for short term liquidity needs. Other centres may also require cash injections for these purposes