Intu Properties says it may not be able to pay its debts in June.
The real estate company is seeking standstill agreements with creditors to avoid default.
With debt of £4.69 billion in 2019, the company has recently laid off 80% of its workforce.
In an announcement on Monday, Intu Properties (LON: INTU) said it may not be able to meet its debt obligations next month. The company cited falling rent payments and announced plans to negotiate standstill agreements with creditors to cushion the economic blow of COVID-19.
In early May, Intu announced that it had received debt relief until June 26. The Real Estate Investment Trust Company is now seeking standstill agreements to interrupt the repayment of debt facilities. However, Intu expressed confidence that the delay will not extend beyond December 2021.
The owner of the Trafford Centre in Manchester will be the first in high profile real estate companies to announce a default risk due to the coronavirus pandemic. The initial reaction to the news was a 19% drop in the company’s shares on Monday. Later in the day, however, Intu recouped its losses and traded 4% higher on the stock market.
The Lakeside owner has seen its market capitalization decline by 90% in 2020.
Intu Properties is not CCFF eligible
Property owners in the UK such as Intu, British Land and Hammerson have been hit hard by the ongoing health crisis, which has driven thousands of tenants into store closures. Countless retailers have reported that they will not be able to pay rent in 2020.
In an effort to improve its finances, Intu had sold some of its troubled properties in Spain and the UK last year. Due to the growing uncertainty surrounding Coronavirus, it is unlikely that the company will be able to sell more properties or secure new financing to meet its debt obligations, the company added.
According to Intus spokeswoman, the real estate company is not eligible for the CCFF (COVID Corporate Finance Facility). The government program only supports large companies that were financially strong before the outbreak.
Intu Properties reported net debt of £4.69 billion in 2019.
In 2019 Intu Properties had net debt of £4.69 billion, while losses exceeded £2 billion. Even before COVID-19, the company’s future without new funding was already in doubt in March.
Previously, the UK-based company had estimated the government measures, including tax deferral, cost support for employees and suspension of corporate taxes, hoping to see a positive impact on its financial performance.
In an attempt to reduce costs, Intu has so far laid off 80% of its workforce, which includes 2,600 employees in Spain and the UK.
At the time of writing this article, the value of Intu Properties is estimated at £60.46 million.