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Umeed, With respect, the read-across from today's Half Year results of Land Securities, allied to Intu's latest numbers, suggests you are being overoptimistic. You are half-right in saying they don't need a buyer, they need a massive refinancing, but very wrong in saying they're not in financial trouble. They simply have far too much debt. Look at these numbers:
Half Year net rental income £205m, less G&A expenses £21m and Debt Service £134m = £50m surplus to cover all capital expenditure on improving properties and paying down the current total debt of Four Billion, Seven Hundred and Fourteen million pounds. This surplus of £100m pa would take 24 (Twenty Four) years to halve this debt (not the 10/14 years to repay it all, as you suggest). And as Sain points out, they don't even have five years to sort it out.
The only way they can fund any substantial capital expenditure is via more debt and who will lend it to them? Intu appears to understand this, where the Q3 Update says, "reduction in capital expenditure pipeline."
My Sunday estimates of the likely LTV ratio at 31/12 are, perhaps, slightly understated, but based on LSecs regional retail drop in value of 9.4% and ERV drop of 3.7% and a yield of 5.5% (up 36 basis points), it looks highly likely now that the year-end LTV will be either side of 65% (Compare that to LSecs 28% LTV and you see the size of Intu's problem).
Matthew Roberts makes mention of visiting all his major tenants CEO's in the past few weeks. That reminded me of Next plc's CEO, Lord Wolfson, who, in his latest report, said that "Our intention is to halve our rents payable, as all our leases fall due for renewal in the next five years." I'll bet, hearing that curdled Matthew's coffee.
I ran out of space on the weekend and couldn't point out that, if, as, and when, they get the Spanish assets sold, every £100m of sales proceeds will reduce the LTV by 1%. Pretty insignificant but nonetheless helpful, as the ratio will go down.
Wearing my bookie's hat, there's a dirty great Rights Issue coming, if Intu can line up some of the market's biggest operators to back it. Intu have some absolutely wonderful properties, but the enormous unknown is what tenants will be paying to occupy them in five years, as this internet shopping tsunami plays itself out. It's an enormous risk for a KKR, or Brookfield, to plough, say, £200 million, or more, each, into an equity issue to get the LTV down to 32%, only to find in 5 years that it's gone back to 65% because rents have halved in the meantime. Interesting times, indeed. Risky!!
Umeed
Herein lies the rub .Unfortunately their debts mature a lot sooner than 14/15 years As Gwellia points out they are very close to breaching LTVS especially with the continuing theme meted out by Land Sec today
Onerous financial penalties accrue and they will be looking down the back of the sofa to divi up .The sausage isbeing squeezed
Santa needs to come to town this Xmas
https://www.retailgazette.co.uk/blog/2019/11/new-look-half-year-sales-affected-going-uncertainty/
The tin vessel is rattling and the bolier spluttering .Umeed the private investor comes rightdown the pecking order in all this This is a game being played elsewhere
Whatever anyone says. Truth is that, Intu do not need buyer nor they are in any financial trouble. Position is that, if Intu do not pay dividend for next 14 to 15 years, they would pay off their debt without doing anything and would be debt free with all their assets what they have now.
Another thing to remember is that, if retail sectors have no value than why anyone would buy it anyhow? … Or if retail sector is losing value and eventually, would be valueless, then also no one would buy with such prospect. So, in that case, into share price would be already zero, company bankrupt and there is no way they can come out of this pit hole. If anyone thinks that into is already valueless, then they should transfer their shares to me and I would pay them a nominal sum, maybe few pence, as to them, even few pence are something for shares they believe is valueless.
As far as I am concerned, I know that people can make or lose money in shares. Keeping that in mind, I would prefer losing all my investment in Intu (several 10s of thousand pounds) because company gone bankrupt than losing due to stupid decision (of selling low), because I believe if I lose my investment in Intu than that would be bad luck of holding shares in good & solid company, as I believe I would be stupid if I sell Intu shares below £2.00. In reality, I believe Intu share price would rocket after Briexit finalises (in EU or out) and once dividend would start (most likely after Briexit), Intu share price could shoot over £5.00, and that could be few years down the line.