UK shopping centres could be forced to close as Intu warns it faces administration

The group, which also owns Lakeside in Essex, remains locked in crunch talks with lenders ahead of a deadline on Friday. It confirmed KPMG is on standby as it looks to secure vital breathing space.

Intu is hoping to arrange a so-called standstill agreement on terms of up to 18 months, but said that at this stage it is unlikely to be more than 15 months.

It warned if it cannot reach an agreement and is placed in administration, without critical upfront funding from its lenders "there is a risk that centres may have to close for a period".

Intu is thrashing out details of a possible agreement with lenders before Friday, when covenant tests are due on its lending deals.

Given the impact of the coronavirus crisis on shopping centres, which were forced to close for nearly three months, the business is likely to fail these tests.

It is also due for updated valuations of its shopping centres this month, which could see it breach lending agreements, given woes in the sector.

Intu said talks are focusing on the length of a possible standstill, how much creditors could share in any future upside in shopping centre valuations, as well as changes to how shopping centres are funded to allow them to pay for staff, such as security and health and safety.

It said: "Some centres have reduced rent collections as a result of Covid-19 and cash trapped under their financing arrangements which restrict their ability to pay for support, such as shopping centre staff, from other entities in the Intu group."

If this cannot be secured, then malls may be forced to shut, it warned.

Intu said: "In the event that Intu Properties plc is unable to reach a standstill, it is likely it and certain other central entities will fall into administration.

"In this situation, all property companies would be required to pre-fund the administrator to provide central services to the shopping centres.

"If the administrator is not pre-funded then there is a risk that centres may have to close for a period."