Intu, the owner of popular shopping centers like Lakeside and the Trafford Centre, is currently grappling with a financial crisis due to weak rent collections and unfavorable market conditions. The company’s massive debt of approximately £4.5 billion puts it at risk of defaulting, prompting it to seek standstill agreements with its lenders. Despite recent efforts to sell off assets, Intu has warned that it will likely breach its debt commitments by the end of next month. This situation has been exacerbated by the closure of its centers, outstanding rental payments, and the negative impact on property valuations. Moreover, the company is facing limited options for additional funding or asset disposals because of the current state of the investment market.

To alleviate its financial woes, Intu secured debt waivers until June 26. However, it now aims to negotiate new standstill agreements that would provide breathing room until December of next year at the latest. The company has engaged in financing talks with key stakeholders at the asset level to explore all available options. The ultimate goal is to rectify Intu’s balance sheet in the long run. Standstill agreements are viewed as the best approach for creating a stable environment to address the financial situation, with a focus on maximizing value.

But what exactly do these standstill agreements entail? They are designed to grant Intu relief from financial covenant testing, debt amortization, and facility maturity payments. The provisions also aim to achieve self-funded operational and financial costs across various property-owning structures without relying on Intu Properties plc for any shortfalls during the standstill period. Interest payments will be made if possible, taking a “pay if you can” approach. The company has emphasized its commitment to fairness and stability in its standstill proposals, recognizing the potential for conflicting interests among stakeholders throughout this period of market disruption. However, it remains uncertain whether these agreements can be reached with all or some of the company’s creditors, and what the specific terms will be.

Useful links:
1. Intu Group official website
2. Financial Times article on Intu’s crisis