(Alliance News) - Intu Properties PLC on Monday said it will need standstill arrangements in place to prevent breaching banking covenants or financial liquidity requirements.
Shares in Intu were down 6.8% in Johannesburg in morning trade at ZAR0.96 and were up 0.9% at 4.37 pence in London.
These standstill-based agreements would seek relief for Intu from covenant testing, debt amortisation, and maturity payments until no later than the end of 2021.
The real estate investment trust announced at the start of May that it has obtained a waiver for some breaches of its revolving credit facility through to June 26 and was talking with "key stakeholders", while assessing its options including a possible standstill.
Right now, there is "significant market uncertainty" when it comes to the impact of Covid-19 on Intu's shopping centres and "the speed of recovery once the UK comes out of lockdown remains unclear."
Aside from essential stores, all Intu centres will remain semi-closed until June 1 at the earliest and this will hurt rental collections and valuation as at June 30. For this reason, Intu is expecting to breach covenants or liquidity requirements.
On top of this, Intu does not expect to be able to dispose of assets or obtain enough funds to fix any covenant issues that do arise. It therefore contends that a standstill is the best option going forward.
"Intu believes that in order to provide a stable environment in which to address this situation, standstill-based agreements with relevant financial stakeholders across its structures, at both the asset and the group level, are the best course of action and its primary focus to maximise value," said Intu.
Standstill provisions would be aimed at Intu achieving "self-funded operational and financial costs only across the different property owning sub-structures" with no recourse to the company for any shortfalls in the standstill period, and interest would be "pay if you can".
"Intu believes that the best way forward is achieving stability through such a standstill until the market dislocation has stabilised and asset valuations and portfolio performance can be better understood by investors and debt providers and risk can be appropriately priced. When market dislocation has passed, there will be greater opportunity to explore alternative capital structures and solutions and disposals to ultimately fix the balance sheet," the company explained.
However, while seeking a standstill, Intu warned there will be earlier individual breaches for some of its financings in the coming weeks, which it will try to address "as part of the wider discussions".
By Anna Farley; annafarley@alliancenews.com
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