Intu Properties, the debt-laden owner of shopping centres, including the Trafford Centre in Manchester and Lakeside in Essex, has won some breathing space by agreeing an extension to its overdraft facility.
The seven banks providing Intu with its revolving credit facility have agreed to a new four-year £440m overdraft, conditional upon the firm raising at least £1.3bn in a rights issue.
Intu is struggling with a £4.7bn debt burden and its share price has crashed almost 90% over the last 12 months.
The company confirmed it would be issuing an emergency cash call to investors alongside its full-year results, which are due on 5 March. It had previously declined to name a figure.
Matthew Roberts, Intu’s chief executive, said the overdraft extensionwas a key milestone towards addressing the company’s short-term refinancing needs.
“Fixing the balance sheet remains our number one priority and we remain engaged with shareholders and potential new investors in relation to the intended equity raise,” he said.
The new overdraft facility has less headroom than the one it replaces, which was worth £600m and was due to expire in October 2021.
Rob Virdee, an analyst at the property consultancy Green Street Advisors, said the lower amount being lent by banks suggested they did not want to increase their exposure to Intu.
He said even if Intu raised the £1.3bn mandated by the overdraft agreement it would not be enough to resolve the company’s debt issues.
“It is not enough to draw a line under any concerns about financial distress that prospective investors have,” he said.
The announcement briefly bolstered Intu’s shares, but they were still trading at close to record lows on Wednesday, just above 14p, valuing the company at £186m. That is just a fraction of the £8bn at which its properties are officially valued, although analysts expect arevaluation to show their assets are now worth substantially less.
Intu has faced difficulties as some of its biggest tenants, including Debenhams, House of Fraser, and Topshop’s owner, Arcadia, have undergone emergency restructurings, closed stores or requested rent reductions.
The move to online shopping, the rising costs of running stores for retailers and weaker consumer spending have led to a high-street crisis at national chains, and lower rents and higher vacancies at Intu centres.
The shopping centre owner has been selling some of its assets to raise cash and lower its debt, but few analysts believe a £1bn cash call will be enough and think Intu will need to take more drastic action to shore up its finances.