Intu Properties tumbles as it cancels equity raise

(Sharecast News) - Shopping centre owner Intu Properties said on Wednesday that it was unable to proceed with an equity raising due to uncertainty in stock markets.
The company, which had been in talks with shareholders and potential new investors about a possible ?1bn to ?1.5bn equity raise, said: "The board believes the current uncertainty in the equity markets and retail property investment markets precluded a number of potential investors from committing capital into the business and Intu was therefore unable to reach the target quantum at the current time."

The owner of the Trafford Centre in Manchester said it had received "several expressions of interest" to explore alternative options to raise funds, such as capital structures and asset disposals.

"Accordingly, Intu will continue and broaden its conversations with its stakeholders with a view to discussing the range of options available to the company to demonstrate the equity value of the business and to utilise its assets to provide further liquidity," it said.

With the publication of its preliminary results delayed by a week to 12 March, the group provided an update on trading.

It said footfall in Intu UK centres was flat, "significantly" outperforming the Springboard footfall monitor, which was down on average 2.5%. Footfall at its centres through the first eight weeks of 2020 rose 0.9% compared to the same period in 2019.

Full-year 2019 like-for-like net rental income was in line with the guidance given in the November trading update, down 9.1%.

Intu backed its 2020 guidance for a further decline in net rental income but at a slower rate than 2019.

The company said it was currently in compliance with its debt covenants. However, there is a risk that, depending on the performance of its business and movements in valuations, it could be in breach of certain covenants at their scheduled testing date in July 2020.

At 1015 GMT, the shares were down 26% at 7.90p, firmly in the red but off earlier lows.

Broker Liberum cut its price target on sell-rated Intu to 5p from 14p after the update and said: "More cash is needed in the medium term, and this is not a good time to be a forced seller.

"Evidence tells us that only smaller shopping centres are transacting. July 2020 becomes the next key testing date for covenants; if breached, we expect banks will start taking control with further negative implications on larger UK shopping centre values, unless mitigating actions can be taken."

Neil Wilson, chief market analyst at Markets.com, said the cancellation of the equity raise casts doubt on the future of the business.

"No one wants a piece of shopping malls - no real surprise, the current financial market conditions are hardly helpful either. Wrong business, wrong time," he said.

Russ Mould, investment director at AJ Bell, pointed out that sentiment was already weak towards the business due to ongoing woes in the retail market and falling retail property valuations, so the equity raise was always going to be tough and potentially result in new shares being issued at a very large discount to the market price to compensate investors for the risks they would be taking on.

"The fact that the equity raise has been scrapped altogether leaves Intu in a very difficult situation. There is no solid plan B and so the market will now be asking big questions as to how Intu might be able to crawl out from under the significant weight of its ?4.5bn net debt position.

"Intu's only plausible solution is to sell more assets but that may simply tide it over temporarily rather than create a long-lasting fix to its sticky situation. Its future is looking far from bright."