Intu, the largest shopping mall owner in the UK, has taken the drastic step of filing for administration after failing to negotiate a resolution for its £4.5 billion debt. The company, which boasts 17 malls and nine of the top 20 shopping centers in Britain, has fallen victim to the economic fallout of the coronavirus crisis. Administrators from KPMG will now attempt to find a buyer for the entire group. However, there are concerns that due to the urgency of its financial situation, a quick sale may occur, resulting in malls being sold at considerably lower prices.
The impact of the coronavirus pandemic has severely restricted Intu’s ability to generate funds, leaving it with no choice but to either secure a standstill agreement on its debts or seek administration. While the company had been engaging in discussions with its creditors to secure an 18-month standstill agreement, negotiations ultimately failed to reach a satisfactory resolution. Consequently, filing for administration appeared to be the only viable option. In the event that Intu could not provide the administrators with upfront payment, it had warned that its shopping centers would have to temporarily shut down. Nevertheless, the company has confirmed that, for the time being, its malls will remain open.
The potential closure of Intu’s shopping centers would prove catastrophic for the retailers operating within them, particularly since they had only recently reopened following the easing of the lockdown measures. Intu currently employs approximately 2,500 individuals and supports an additional 30,000 workers within its wider supply chain. In total, the company’s centers provide employment opportunities for over 100,000 individuals.
The administration process for Intu is expected to be highly intricate due to the complicated corporate structure of the company, which consists of various entities that collectively own its shopping center assets. These entities are brought together under the umbrella of the parent company, which is listed on the London Stock Exchange. Furthermore, Intu must contend with complications stemming from ongoing renovation projects at the Broadmarsh Centre, Merry Hill, and the Trafford Centre, all of which were interrupted by the lockdown measures implemented in March.
Intu’s staggering £4.5 billion debt is of significant concern, particularly when considering its meager market capitalization of just over £24 million. This represents a substantial decline from its valuation of over £4 billion around five years ago. The outcome of Intu’s administration and the future of its malls remain uncertain, instigating fears about the potential adverse effects on the retail property sector if a “fire sale” scenario materializes.