Intu Properties, which was formed out of the late billionaire Donald Gordon’s Liberty International 10 years ago, has reached its darkest hour as it tries to get its creditors to waive terms on £600m (R12.9bn) of loans until the end of next year.
Failure to do so could send the company into administration and some of its malls may shut down, leading to thousands of job losses.
Intu, which owns shares in 17 malls in the UK and two in Spain, has struggled to survive a changing retail landscape as online shopping competes with high street retail. It has been choking on debt of about R100bn, which compares unfavourably with its market capitalisation of R1.55bn. The company has tried to sell its Spanish and some of its UK assets, but the Covid-19 pandemic has delayed those deals.
Its UK malls include the world-renowned Trafford Centre in Manchester and high-end Lakeside mall in Essex.
During the UK’s lockdown, Intu, whose SA shareholders include Investec, also suffered a drop in sales of non-essential goods.
More than 20% of Intu is owned by SA institutions and individuals. Coronation Fund Managers is Intu’s second-biggest shareholder after the Peel Group, with about 10% of the company. Investec owns about 6% of the stock and the Gordon family still retains a 6% shareholding.
On Tuesday, Intu said it had appointed KPMG to administer services to shopping centres in the event that it was unable to reach a new debt agreement with lenders by June 26.
“In the event that Intu Properties 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,” it said.
The company's assets have lost value in the wake of uncertainty around the Brexit process after the 2016 referendum for the UK to leave the EU.
Analysts have previously criticised Intu for its failure to modernise some of its shopping centres in the past 10 years. Intu’s losses almost doubled to £2bn in 2019.
Intu CEO Matthew Roberts, who took over from David Fischel at the end of April 2019, has been trying to sell assets to bring down the company’s relative debt levels of loan-to-value. He is being helped by a chief restructuring officer David Hargrave. Neither of them were available for interviews with Business Day on Tuesday.
Roberts has said Intu would consider converting some of its centre space into hotels and other housing in London. He has not said which stakes in UK malls Intu wants to sell to get out of trouble.
Evan Robins, portfolio manager at Old Mutual Investment Group, said questions were being raised about whether Intu should reconsider its listings on the JSE and in the UK.
“They need to consider what benefits they get from being listed at all versus the costs of being a public company. This is while they have such severe banking issues. But Intu still has SA investors on its books and some of these would not wish for it to lose its JSE listing,” he said.
The company’s share price fell 10.43% to R1.03 on Tuesday and has lost more than 98% of its value over five years.
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