Intu Properties Plc has abandoned a plan to raise as much as 1.5 billion pounds ($1.9 billion) of new equity it needs to stave off lenders, throwing the indebted mall landlord’s future into doubt.
The company said it’s now exploring alternative capital structures and further asset sales, after receiving “several expressions of interest during the process.” The shares fell the most on record.
Uncertainty in the equity and real estate markets kept a number of potential investors on the sidelines, the London-based company said in a statement Wednesday. The value of Intu’s malls and stores plunged by 2 billion pounds in 2019, a 22% decline on the previous year and about a third below their 2017 peak as retailers closed stores and sought rent cuts.
“While it is disappointing that the extreme market conditions have prevented us from moving forward with our planned equity raise, I am pleased that a number of alternative options have presented themselves during the process which we will now explore further,” Chief Executive Officer Matthew Roberts said.
Intu shares fell as much as 43.7% in early London trading, and were down 15.4% at 8:46 a.m.
Bricks and mortar retailers are shrinking their estates as they struggle against tax hikes, a sluggish economy and the rise of online giants like Amazon.com Inc. That’s spooked retail property investors and is pushing down mall values, forcing up Intu’s relative indebtedness.
Intu last month said its banks had agreed to extend a crucial line of credit if the company could raise at least 1.3 billion pounds of equity. The landlord’s current 600 million-pound credit facility from seven banks expires next year. The lenders, which include Bank of America Corp. and Barclays Plc, agreed to replace that with a 440 million-pound line of credit that would run to 2024.
That’s now in doubt and despite a slew of asset sales and cuts to its planned capital expenditure, the company is close to breaching debt covenants. A further 10% fall in values would mean the company must pay 113 million pounds to ensure it doesn’t breach its loan terms. It would also mean repaying about 161 million pounds of its revolving credit facility.
Intu will have about 168.3 million pounds of cash following its latest round of asset sales, and a further 129.2 million pounds of headroom on its existing loan facilities.
Intu short interest stood at 13.7% of shares outstanding on March 2, up from about 10.5% in the first half of January, according to data compiled by IHS Markit. Odey Asset Management was the biggest short seller of the stock with a short interest of 3.5%, Bloomberg data show. A spokesman for Odey declined to comment.
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