Debt-stricken Intu falls victim to Covid-19 downturn

16 July 2020 Consultancy.uk

Struggling shopping centre owner Intu has appointed, administrator after it said talks with creditors had reached “insufficient alignment and agreement.” The firm reported financial losses of £2 billion in 2019, and in its weakened state the sudden pressures of the Covid-19 lockdown proved too much for it to handle.

Intu had been facing financial woes for some time, including around £4.5 billion in debt and £2 billion of losses reported for the 2019 financial year. Like many members of the UK retail scene already struggling before the Covid-19 pandemic lockdown, the crisis subsequently proved a bridge too far for the ailing firm. James Tucker, Michael Pink and David Pike of KPMG were subsequently appointed as joint administrators to Intu and several other key central entities in the Intu Group in late June.

In the week leading up to the announcement, the shopping centre portfolio owner is understood to have been discussing with lenders and shareholders several points needed to agree the postponing of certain debt obligations for a maximum period of 18 months to help fix its balance sheet. Points under discussion during the past week have included the length of the proposed standstill period, with some stakeholders wanting a term of less than 18 months as they are wary about the speed at which the retail sector could bounce back.

Debt-stricken Intu falls victim to Covid-19 downturn

KPMG Partner James Tucker commented, “Intu owns many of the UK’s biggest and best-known shopping centres. The challenges affecting UK retail are well known and have been exacerbated by the impact of Covid-19 and the resulting lockdown. As this 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.”

Business advisory firm Quantuma specialises in corporate recovery and restructuring work. According to Director Brian Burke, the news of Intu’s collapse does not come as a complete surprise.

“Invariably, Intu have had issues for some time, which have been intensified in recent months, and there can be no doubt that the coronavirus pandemic has swiftly intensified the position,” Burke commented. “The significant impact on its cash position is not unexpected. The business will have been hit hard by the partial closure of its centres when non-essential retailers closed their doors and the resulting meagre rent receipts for the March and June quarters.”

Reportedly, when it first placed KPMG on standby to become administrators, Intu also began seeking funding to operate the business during administration. Apparently, the firm stated its requirement was £12 million – a notable figure given without it they would be unable to operate certain centres, and the approach to bondholders of Metrocentre and Trafford Centre is sensible. Burke suggested that this was part of a plan hinging on the relaxation of lockdown rules, though.

He added, “The strategy, one assumes, will be to trade the business and ensure the centres re-open fully as we exit lockdown. This will generate cash and assist to preserve property values, although given the impact upon tenants it is difficult to see how this will look compared to historic performance.  Ultimately, the focus will be on preserving value and jobs. They will seek to generate the best outcome for Intu’s creditors and to achieve this, the business needs to be functioning. In turn, this will offer sufficient flexibility to allow the Intu portfolio to create an effective work out that may result in the portfolio being carved up and sold.”


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