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Intu seeking standstill with creditors until end 2021
18th May 2020 07:50
(Sharecast News) - Shopping centre owner Intu Properties said on Monday that it is seeking standstill agreements with its creditors as it warned it could breach its covenants amid uncertainty over the impact of the Covid-19 outbreak.
The company, which owns the Lakeside and Trafford shopping centres, announced earlier this month a waiver of certain potential breaches in respect of its revolving credit facility until 26 June and said it was extending its engagement to key stakeholders, including potentially seeking standstills.
Intu said discussions have been ongoing since then. It pointed to continued market uncertainty over the impact of the coronavirus on its operations, which, with the exception of essential stores, remain semi-closed until at least 1 June. In addition, it said the speed of recovery once the UK comes out of lockdown remains unclear.
"The resulting impact on rental collections and valuations at the end of June is likely to result in breaches of covenants or material liquidity requirements if any such breaches are to be cured in accordance with the financing documents at that time.
"This market backdrop, where the investment market is effectively closed, also creates material uncertainty for any asset disposal or additional funding process which Intu might pursue to address these covenant issues."
Intu said that to provide "a stable environment" in which to address the situation, standstill-based agreements with relevant financial stakeholders at both the asset and the group level, "are the best course of action and its primary focus to maximise value".
"These standstill arrangements would seek relief from financial covenant testing, debt amortisation and facility maturity payments for a period through to no later than 31 December 2021. The standstill provisions would also aim to achieve self-funded operational and financial costs only across the different property owning sub-structures, without recourse to Intu properties for any shortfalls during the standstill period with interest being 'pay if you can'."
Intu said achieving stability through such a standstill was the best way forward until "the market dislocation has stabilised", at which point there will be greater opportunity to explore alternative capital structures and solutions and potential disposals to fix the balance sheet.
The company pointed out there can be no certainty as to whether any standstill can be achieved with all or some of its creditors, or as to the terms and said it is possible that earlier individual breaches, under certain of the group's financings, could occur over the coming weeks.
Liberum analyst Tom Musson said: "Despite today's update, we continue to believe the company does not survive without government help."
The company, which owns the Lakeside and Trafford shopping centres, announced earlier this month a waiver of certain potential breaches in respect of its revolving credit facility until 26 June and said it was extending its engagement to key stakeholders, including potentially seeking standstills.
Intu said discussions have been ongoing since then. It pointed to continued market uncertainty over the impact of the coronavirus on its operations, which, with the exception of essential stores, remain semi-closed until at least 1 June. In addition, it said the speed of recovery once the UK comes out of lockdown remains unclear.
"The resulting impact on rental collections and valuations at the end of June is likely to result in breaches of covenants or material liquidity requirements if any such breaches are to be cured in accordance with the financing documents at that time.
"This market backdrop, where the investment market is effectively closed, also creates material uncertainty for any asset disposal or additional funding process which Intu might pursue to address these covenant issues."
Intu said that to provide "a stable environment" in which to address the situation, standstill-based agreements with relevant financial stakeholders at both the asset and the group level, "are the best course of action and its primary focus to maximise value".
"These standstill arrangements would seek relief from financial covenant testing, debt amortisation and facility maturity payments for a period through to no later than 31 December 2021. The standstill provisions would also aim to achieve self-funded operational and financial costs only across the different property owning sub-structures, without recourse to Intu properties for any shortfalls during the standstill period with interest being 'pay if you can'."
Intu said achieving stability through such a standstill was the best way forward until "the market dislocation has stabilised", at which point there will be greater opportunity to explore alternative capital structures and solutions and potential disposals to fix the balance sheet.
The company pointed out there can be no certainty as to whether any standstill can be achieved with all or some of its creditors, or as to the terms and said it is possible that earlier individual breaches, under certain of the group's financings, could occur over the coming weeks.
Liberum analyst Tom Musson said: "Despite today's update, we continue to believe the company does not survive without government help."