Ailing shopping centre owner Intu (INTU.L) warned on Tuesday that it had lined up KPMG as potential administrators in case rescue talks with its lenders failed.
Describing the move as a “contingency plan,” Intu said it was still hoping to strike standstill-based agreements with creditors, which would halt repayments on its debt for a certain period.
The company’s current debt waivers expire on 26 June.
Intu, which owns Essex’s Lakeside shopping centre, the Metrocentre in Gateshead, and the Trafford Centre in Manchester, previously said that it was seeking an 18-month standstill agreement, warning that it could breach debt agreements by July due to coronavirus-related disruption.
But it said on Tuesday that the standstill agreements were not expected to last more than 15 months.
“In the event that Intu Properties is unable to reach a standstill, it is likely it and certain other central entities will fall into administration,” the company said.
Discussions with lenders are focused on the duration of the agreement, how the company’s assets would be broken up in the future, and how cash-strapped shopping centres will be funded so that they can survive the pandemic.
The company said that it would be difficult to secure additional funding for the centres if it did not get authorisation to release cash from existing debt structures for its short-term liquidity needs.
Intu said this all remained “subject to further negotiations,” warning that there was “no certainty” as to whether a deal could be struck, or on what terms or for what duration.
If the company was to collapse into administration, Intu said that the administrator would require funding such that it could 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,” it said.
Intu said in May that standstill agreements with creditors would “provide a stable environment” for the company, noting that the pandemic had resulted in a collapse in rental collections from tenants in its shopping centres.
It warned that the speed of the recovery once the UK exited lockdown remained “unclear.”
The standstill agreements will pause financial covenant testing, meaning that Intu could breach certain terms of its original loan agreements without consequences, and postpone repayments.