THE owner of Lakeside and the Trafford Centre has warned that its shopping centres are at risk of closing as it teeters on the edge of administration.
Intu Properties is locked in crunch talks with lenders as it attempts to secure breathing space from repaying debt to keep the business going.
The group says it has been unable to collect full rent payments from some retailers due to reduced rates in place following the coronavirus crisis.
Intu has now placed accounting firm KPMG on standby to create a “contingency” plan should it fail to finalise a deal with creditors.
This means the group hasn’t officially entered administration at this stage, but it is thrashing out the preparatory work should it happen.
It hopes to arrange an 18-month break from repaying its debt, but says some creditors will only allow it 15 months.
What is administration?
ADMINISTRATION is when all control of a company is passed to an appointed administrator.
The administrator has to be a licensed insolvency practitioner.
Their goal is to leverage the company's assets and business to repay creditors, so it doesn't necessarily mean the end of a business.
Administration is slightly different to liquidation.
Where administration aims to help the company repay its debts, liquidation is the process of selling all assets and then dissolving the company completely.
Intu warned that if it can’t reach an agreement, and it doesn’t receive upfront funding from lenders, some shopping centres “may have to close for a period”.
The company said a deadline of June 26 has been proposed, with administrators to be called in after this date if a deal hasn’t been reached.
While Intu shopping centres have remained open during lockdown, the majority of stores inside have been closed after the government ordered all “non-essential” businesses to shut.
Shops that were allowed to stay open include banks, pharmacies and those that sell food.
In its Lakeside shopping centre in Essex, only around 10 per cent of stores were in operation throughout lockdown.
But the group has been struggling before the coronavirus crisis, and was reported to be £4.5billion in debt at the start of this year.
Several of its retailers, including Debenhams, House of Fraser, and Topshop’s owner, Arcadia, have undergone emergency restructurings, closed stores or requested rent reductions.
Meanwhile, an increase in online shopping and rising costs for retailers have also placed many UK retailers under strain.
Intu said talks are focusing on the length of a possible standstill and changes to how shopping centres are funded to allow them to pay for staff, such as security and health and safety.
The group owns 20 shopping centres in the UK, including the Victoria Centre in Nottingham and Intu Watford.
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."
"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."
Retailers that have sadly fallen into administration this year include Victoria's Secrets, Oasis, Warehouse and Debenhams.
Shoe chain Aldo has also collapsed, while Quiz clothing has put its shop business into administration.
We've got a full round-up of all the shops and restaurants that have gone bust here.
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