January 20, 2020 / 7:29 AM / a month ago

Debt-laden mall operator Intu turns to investors for cash

(Reuters) - British shopping centre operator Intu Properties (INTUP.L) is in talks with shareholders and potential new investors to raise funds to shore up its balance sheet after being hit by a spate of high-profile failures in the retail industry.

Shares in the owner of Manchester's Trafford Centre fell to a record low on Monday after it said it was seeking new equity capital by the end of February. It did not say how much it was looking to raise but the Sunday Times reported here this weekend that it could be as much as 1 billion pounds.

Against a tough economic backdrop, Intu has borne the brunt of company voluntary agreements - an insolvency procedure used by retailers to restructure leases - from brands including Debenhams, Toys R Us, House of Fraser, New Look and HMV, while other companies are increasingly focusing on online sales in a bid to cut costs.

Intu’s shares, which lost more than two-thirds of their value last year, sank as much as 10% and some analysts questioned whether the reported sum sought would be enough.

“The dilution (effect) of raising 1 billion pounds, or 3.2 times the current market cap, will effectively write off those investors who do not participate, but our concern is that this is not enough,” Numis Securities analyst Robbie Duncan said.

Intu’s net debt stood at 4.68 billion pounds at the end of June, compared with a current market capitalisation of about 311.4 million pounds.

The company had said in November it was considering raising equity and selling assets to boost its balance sheet.

“We are making good progress with fixing the balance sheet, our number one priority,” Intu said in a statement on Monday, adding that it had sold shopping centres worth nearly 500 million pounds in 2019 and talks to sell intu Asturias in Spain were at an advanced stage.

Numis’ Duncan added that Intu would need significantly more capital to get back on the front foot and compensate for under-investment in their “capital consumptive” malls.

Analysts at Liberum echoed the concerns, saying that 1 billion pounds would only cover debt maturing to 2021 but not beyond and estimating that the company needed around 1.6 billion pounds.

Both Numis Securities and Liberum have a ‘sell’ rating on Intu’s stock.

Reporting by Yadarisa Shabong in Bengaluru; Editing by Shailesh Kuber, Anil D'Silva, Kirsten Donovan

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