Sain, the money from the sale of Spanish assets will come, no doubts. They are being delayed by lockdowns, no drama.
Coronavirus may have a small silver lining: intu may be able to get a bank loan that will help them with the liquidity.
Also, the rental money is still due but just delayed. But may be less if intu agree to lower the rent during these three months.
Business rate holidays for all and forthcoming business rate reform is a big potential tailwind for intu.
Having said all said, the valuations will suffer further and potentially by a lot. This maybe a final bullet. I just hope that the valuers can suspend the valuations at the H1-2020 due to exceptional situation in the whole world.
Gewillia, as per intu’s 2019 results the passing rent has increased bu 1%. So, I do not agree that in few years time the rent income would collapse.
It is true that many fashion shops start to pay less. But others , like entertainment, restaurants, are paying more. Again, official results show 1% of passing rent increase.
Also, with current business rate holidays for one and forthcoming business rates review later this year, the affordability of rental by shops and others may improve in the long term.
Even considering CVAs , as intu pointed out, over the last five years net rental income reduced by 3% while the asset valuations dropped by 29%, see their annual results presentation page 7.
However, the risk of Intu’s bankruptcy is big because of falling valuations, poor sentiment and debt covenants. Another about 20% fall in valuations will wipe out any equity left.
A miracle with getting big Govt backed financing or/and opportune bid from big players or/and urgent successful sale of big assets can save intu from bankruptcy. A combination of the above would be good at this time.
Intu may not be losing any income , only a delay in payments by three months.
However, any further decreases in valuations of centres (which are extremely likely now at H1-2020 results) may be a killer for intu.
Not sure if banks would agree to waive covenants considering an extraordinary situation in the country.
Can the valuers not assign any new valuations and leave the valuations at Dec 2019 levels due to the situation?
I also understand that rent agreement or CVA agreement are legally binding. Tenants cannot just stop pay or pay less even if there is corona virus around. In similar way, intu or shops cannot say to banks that they will not pay back the debts.
Intu should be getting their payments as long as intu keeps the shopping centers open.
I am a shareholder of KAZ and despite share price drop, I am confident that KAZ will bounce back strong. It has low cost of production and copper demand is going up.
In mining low production costs and good balance sheet are very important
Gewillia and Sain, reading your good posts (thanks for those), it looks like intu cannot avoid bankruptcy. It is now only a matter of time, probably months.
I have some fading hope still.
1. It is good to see businesses rate holidays for all tenants of intu. That coupled with the expected reform of business rates can help tenants and make intu’s assets more affordable for shops.
2. Yes, clothing shops are requesting rent cuts. But Intu centers have also restaurants, leisure facilities, cinemas, non clothing shops. The passing rent moved up slightly in 2019.
I think the above two points should give a ling term hope.
In short term, it has become even more difficult to sell assets and improve liquidity and cash in hand.
Also, not sure what corona virus restrictions will do to the valuations. Intu cannot afford another drop in valuations.
Good to see a new shareholder building a position. Now >7%. They must see a good long term future for intu
All, your thoughts please ....
Chancellor extends one-year business rates holiday for all retailers, restaurants, hospitality businesses.
That will help to all intu’s clients a lot !!!
It may even support falling asset valuations
Yes, the agreed price for the sale will decide intu’s future. If significantly under Dec 2019 valuations, it will difficult to avoid bankruptcy. If higher, the share price will fly.
In the financial environment where it is so hard to find a reliable income, one would think that commercial properties with >5% income every year will be in huge demand, especially considering low pound exchange rate and depressed asset valuations. We will see
Sain, the equity raise didn’t happen because, I suspect, Coronation/ SA Gov didn’t support it. They even reduced their share holdings 2 days ago. There’s too much risk of assets valuations going below debt levels wiping out all equity. Maybe others also didn’t support RI.
As a long suffering shareholder, I am also glad that RI did not go ahead. Falling asset valuations make any RI very risky at this time.
Slide 7 of intu FY-2019 presentation shows that over last 5 years property income reduced only by 3% while the property valuations dropped by 29%.
I understand we have some good, knowledgeable guys in these discussions. Can someone please explain how valuers be so disconnected from actual income?
Are they ignorant or am I missing something?
Our current CEO is either bad or brilliant manager. When everyone else have been thinking about disposal of assets as many as possible and as quickly as possible he has been doing a little.
Maybe he knows more than anybody else.
For example, he can sell minimum number of assets just to avoid covenants and still be a going concern business knowing that in 2-3 years the asset prices will recover. In this case, he would be a genius and a great CEO.
However, if intu goes bust, he would go to the history as a bad CEO.
Time will tell. The risks are big.
Corona virus does not help at all.
Today’s results imply that the the downward valuation pressure is still there but .... price stabilisation should start soon.
For the first time intu openly talks about material risk to go bankrupt. The share price reflects that.
The only way to avoid bankruptcy is to sell the assets.
I suspect the RI didn’t happen because some large shareholders believe that bankruptcy risk is too high and there’s no point to throw away 1 or more billion pounds.
Interestingly, CEO underlined that he took over the business only in April 2019. Looks like already trying to wash the hands out. As if he has nothing to do with sleep walking into near death situation of now.
I maintain my position.
If intu does not raise a large sum of money in the next 3 months maximum, for me at least 2bn, they are in big risk of insolvency.
The only thing that can save them is the pick up of the retail property market with valuations stable or going up, which is unlikely at this time.
If you do not believe me, look at share price, price of intu debt and short positions that increased in the last few weeks.
Even their RCF loan was extended on the condition of minimum 1.3 bn equity raise.