Intu Properties, which was listed out of the late billionaire philanthropist Donald Gordon’s Liberty International in 2010, has reached its darkest hour, after failing to raise more than the £1bn (R19.6bn) it needs to keep its day-to-day operations on track.
The company, which owns or part-owns 17 UK shopping centres and one in Spain, saw its share price plummet nearly 34% on Wednesday, after it announced it would not go ahead with a planned equity raise due for the end of February.
Intu, which is listed on the JSE as well as the London Stock Exchange, has been in talks over the past several months with shareholders and potential new investors about raising between £1bn and £1.5bn.
"Following these discussions Intu has concluded it is unable to proceed with an equity raise at this point," the company said via the JSE’s stock exchange news service.
Intu said that while a number of Intu’s shareholders and potential new investors indicated their support for an equity raise, its board believes the current uncertainty in the equity markets and retail property investment markets preclude a number of potential investors from committing capital into the business.
Intu was therefore unable to reach the targeted funds.
Global markets have been battered recently by concerns over the coronavirus outbreak, with the FTSE 100 having fallen almost 11% so far in 2020, while the JSE has given back 7.4%. A number of offshore fund managers have decreased their holdings in UK property stocks and chosen to hold on to cash or to reinvest in safe haven assets such as gold.
The company, which has been selling off assets as it grapples with a debt pile that stood at almost £5bn at the end of June, said it is considering alternatives for shoring up liquidity, which may include further disposals.
Nesi Chetty, a senior fund manager at Stanlib, said the capital position of Intu has deteriorated dramatically over the last two years.
"A weakening UK retail market together with sequestrations in their portfolio has led to large write-downs of their assets. Debt to total assets is now over 70%," he said.
"Current shareholders are probably unwilling to commit fresh capital in a rights issue given the uncertainty in markets right now. They will probably need more than a billion pounds to shore up the balance sheet," said Chetty.
Investors have watched as their company’s share price languished in the doldrums following the Brexit referendum on June 23 2016, when the UK voted in favour of leaving the EU. British retail sales have also come under pressure at certain Intu centres as retailers battle to change their business models to be able to compete with online competitors.
Some tenants have signed company voluntary arrangements (CVAs), an insolvency procedure that allows struggling retailers to impose rent reductions on their landlords.
Intu said in a trading update that its assets have performed to a strong standard despite all of its challenges.
"Outside the challenges caused by tenant CVAs and administrations, Intu delivered a robust operational performance in 2019, and income has been resilient in what has been a challenging year for retail and retail property," the company said.
With Karl Gernetzky
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