Intu, the shopping centre operator in Britain burdened with debt, has announced that its lenders are willing to extend a revolving credit facility until 2024, on the condition that the company can raise at least £1.3 billion ($1.69 billion) through a cash call. This new loan of £440 million would replace the current facility of £600 million, which is set to expire in October 2021.
The decision comes as Intu grapples with reducing its debt amid a challenging retail environment in the UK. With the rise in store closures and the shift towards online sales, Intu has been struggling to adapt. As of June 2019, the company’s net debt stood at £4.68 billion.
In an effort to alleviate its financial situation, Intu has been actively seeking an equity raise by the end of this month. The company has engaged in discussions with its shareholders, including its largest shareholder, John Whittaker’s Peel Group, as well as potential new investors. The new revolving credit facility will be provided by a group of banks already involved in the current loan facility, including Bank of America, Barclays, Credit Suisse, HSBC, Lloyds, Natwest, and UBS.
After the announcement, Intu’s shares initially experienced a slight recovery, but quickly returned to previous levels. As of 1212 GMT, the stock was down 7.5% at 13.9 pence.
Intu’s rival, Hammerson, also faced challenges on Tuesday, dealing with store closures and attempting to reduce its mounting debt. The company chose to almost halve its 2020 dividend as a result.
According to Refinitiv Eikon data, Intu’s combined credit score, indicating the likelihood of defaulting on its debts in the next year on a scale of 100 to 1, was rated as “1,” suggesting an expectation of default.
Securing the revised loan is crucial for Intu’s future financial stability, and its success in the upcoming equity raise will heavily determine this. The company will continue discussions with shareholders and potential investors as it strives to navigate the challenging retail landscape and reduce its debt burden.