Shopping centre giant Intu is on the verge of collapsing into administration, after it failed to secure a deal in financial talks with lenders.
The firm, which owns some of the UK’s biggest shopping centres, including the Braehead complex in Glasgow, has warned that it may be forced to call in administrators if an agreement cannot be reached.
Why is Intu at risk of collapse?
Intu had already been struggling to stay afloat even before the coronavirus outbreak struck, with the firm facing difficulties in filling outlets in some of its centres.
It also had racked up debts of around £4.5 billion, and was forced to place its centres into partial closure during the UK lockdown, keeping only essential shops open. The store closures meant it has received significantly lower rent payments from its retail tenants since the coronavirus outbreak.
Intu explained, “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.”
Have administrators been appointed?
On Friday 26 June, the firm issued an update to investors informing that it had failed to reach an agreement on current loan payments during discussions with lenders.
It was seeking to agree on so-called “standstill” terms, under which it hoped to defer interest payments of up to 18 months, but said that at this stage it is unlikely to be more than 15 months. The firm had until midnight on Friday to reach a deal, but said in a statement that “insufficient alignment and agreement has been achieved”.
Intu had already put administrators from KPMG on stand by earlier this week as a contingency in the event the financial restructuring talks with lenders failed in striking an agreement.
Will centres be forced to close?
The firm warned on 23 June that it may be forced to close its shopping centres if it was unable to secure the standstill agreement.
Intu employs around 3,000 staff across the UK, while a further 102,000 staff work for the shops within its shopping centres, meaning thousands of jobs could be at risk.
In a statement, Intu said, “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.”
Which shopping centres are at risk?
These are the Intu shopping centres at risk of closure if the company falls into administration:
- Braehead, Glasgow
- Broadmarsh, Nottingham
- Chapelfield, Norwich
- Eldon Square, Newcastle
- Lakeside, Essex
- Merry Hill, West Midlands
- Metrocentre, Gateshead
- Milton Keynes
- Potteries, Stoke-on-Trent
- Trafford Centre, Manchester
- Victoria Centre, Nottingham
Centres run as joint ventures:
- Manchester Arndale
- St David's, Cardiff
- The Mall, Cribbs Causeway