Intu Properties will collapse into administration on Friday afternoon after the heavily indebted shopping centre owner failed to secure an agreement with its creditors.
The company, whose centres include Lakeside in Essex, the Trafford Centre in Manchester and Gatesheads Metrocentre, has debts of more than £4.5bn and has been unable to persuade lenders to grant a debt repayment holiday ahead of a Friday night deadline. The company employs 2,500 people and owns 17 shopping centres across the UK.
In its second stock exchange update of the day, Intu said it had begun the process of appointing KPMG, the accountancy firm, to handle the administration, a step that is expected to be completed this afternoon. The company has made a court application to appoint administrators to Intu and several other key parts of the Intu Group. The official appointment will become effective shortly.
The company said all shopping centres would continue to trade.
Intus chief executive, Matthew Roberts, had faced a herculean task in trying to persuade the multitude of banks and bondholders the company owes money to agree to pause repayments. The group is essentially a holding company with £4.5bn of borrowing spread over 21 separate debt instruments creating a complicated web.
Roberts said on Friday morning that the attempt to secure some breathing space for the company had been unsuccessful.
In addition to Intus 2,500 employees, another 100,000 retail workers are employed by its tenants, who include big high street names such as Marks & Spencer, Next and H&M, to work in its centres. The travails of the former FTSE 100 company have weighed heavily on its shares which on Friday were worth just 2p before the administration triggered their suspension. They were changing hands at 200p less than two years ago.
Any sale process will be complicated by the groups complex structure, and property analysts predict it will be broken up. Intu owns nine of the top 20 shopping centres in the UK. Malls such as the Trafford Centre, Lakeside and Gatesheads Metrocentre are likely to attract potential buyers, but its smaller regional malls may prove less popular.
Intu had been under pressure before the coronavirus pandemic. The value of its centres, as well as those of rival operators such as Hammerson and British Land, had been falling as some of the high streets big space occupiers, including Debenhams, House of Fraser and Topshop, closed stores and demanded rent cuts so that they could stay in business.
After lockdown had taken effect, Intu received only 29% of the revenue it was due on rent day. UK retailers are estimated to have stumped up just 14% of the £2.5bn quarterly rent due this week as they try to conserve cash and negotiate new, lower rent deals.
With the shift to online shopping undermining the economics of physical store retailing before the health crisis, the high street shutdown has raised the stakes.
“There is little doubt about the fall from grace of retail property companies,” said Adrian Palmer, a professor at Henley Business School. “Intu has been hit by changes in shopping habits. Online shopping has taken custom not just from high streets, but also Intus out of town shopping centres.
“Retail property used to be considered a safe bet for investment, and many pension funds will be hit hard by the declining value and liquidity of property funds such as Intu which include retail in their portfolio.”