Intu Properties enters administration

September 2020 | DEALFRONT | BANKRUPTCY & CORPORATE RESTRUCTURING

Financier Worldwide Magazine

September 2020 Issue

On 26 June, Intu Properties, which owns and operates 17 shopping centres across the UK, including intu Trafford Centre, intu Lakeside, intu Merry Hill and intu MetroCentre, in addition to a shopping centre and development site in Spain, was placed into administration.

Intu has 2373 employees while another 100,000 retail workers are employed by its tenants nationwide. An additional 30,000 people work in its broader supply chain.

James Robert Tucker, Michael Robert Pink and David John Pike, partners at KPMG LLP, have been appointed as joint administrators. The firm announced that Intu’s shopping centres would continue to trade as normal while the future of the malls is resolved.

Intu had been experiencing significant financial difficulty for some time. The company made a loss of £2bn in 2019 and the value of its retail portfolio fell 22 percent to £6.6bn.

Intu attempted, unsuccessfully, to raise £1bn in new funding earlier this year. Furthermore, prior to appointing administrators, the company’s chief executive, Matthew Roberts, tried to persuade its lenders – a group that includes Bank of America, Barclays, Credit Suisse, HSBC, Lloyds Banking Group, NatWest and UBS – to agree to pause repayments, but was unable to agree a deal. Intu has debts of around £5bn.

In a statement, Intu said: “Underlying group operating companies remain unaffected and all shopping centres are continuing to trade. The Intu group’s relationships with its tenants are with these operating companies, not the companies entering administration. The shopping centre operating companies have or are expected to enter into transitional services agreements with the administrators of the central entities to ensure continuity of service provision by the central entities to the individual shopping centres.”

“Intu owns many of the UK’s biggest and best-known shopping centres,” said Mr Tucker. “The challenges affecting UK retail are well known and have been exacerbated by the impact of Covid-19 and the resulting lockdown. As today’s administration makes clear, those challenges have fed through to owners of retail property, even to owners of high-quality shopping centres such as Intu’s.”

“With all centres remaining open, we look forward to working with staff, suppliers and other key stakeholders to preserve value and jobs in these important retail destinations,” said Mr Pike.

The UK retail industry has been in decline for some time. The growth of e-commerce has had a hugely detrimental impact on retail companies with physical locations. Many leading High Street stores have announced closures or have entered controversial company voluntary arrangements (CVAs) to reduce rent obligations, and the same has happened to shopping centres.

Intu’s market value hit a high of £4.9bn in early 2015 but has tumbled in recent years as traditional stores lost ground to online sellers such as Amazon. In December 2017, Intu’s rival, Hammerson, made a takeover approach at 253p a share, valuing the company at £3.4bn, however Hammerson pulled out of the deal in April 2018 amid concerns that the retail sector was deteriorating. Intu shares plunged to 1.8p in late June 2020, valuing the former FTSE 100 company at just £25m, before trading was suspended. Hammerson has lost almost 90 percent of its value over the past five years, and in May the company revealed that private equity group Orion had walked away from a £400m deal to acquire seven of its retail parks.

The difficulties experienced by the retail industry in recent years have only been compounded by the COVID-19 pandemic and the subsequent lockdown and social distancing measures which have been introduced.

At the start of June, Intu management revealed that the company expected to collect 37 percent less rent this year than in 2019, after receiving just 40 percent of the rent due in respect of the second quarter. On Wednesday 24 June, UK retailers were due to pay rent for the three months to 29 September, however just 14 percent of the £2.5bn due was paid, according to Re-Leased, a property data company. Meanwhile Intu’s debt-to-assets ratio stood at just under 68 percent at the end of December 2019, jumping from 53 percent the prior year.

Richard Summerfield