(Reuters) - Shopping mall owner Unibail-Rodamco-Westfield URW.AS plans to raise 3.5 billion euros ($4.1 billion) to shore up its balance sheet and cut debt to cope with the fallout from the COVID-19 pandemic, which has hit the sector hard.
URW, which also owns office buildings, events centres and commercial real estate in airports, has suffered drops in rental income after retailers were forced to shut for several months during lockdowns around the world.
The company’s shares fell sharply after the announcement and were down 7.3% at 0951 GMT, dragging down those of rival Klepierre too. URW said it was raising the capital and limiting dividends in cash to protect its investment grade rating, which affects a company’s cost of borrowing.
The restructuring comes only two years after URW, Europe’s largest property firm, finalised the $16 billion acquisition of Australian shopping mall giant Westfield.
The deal was presented as a defensive move to create a global leader in a sector already grappling with the challenge of online shopping led by Amazon AMZN.O.
The group said it would now speed up a disposal plan, and had identified an extra 2 billion euros of assets it could sell off, on top of 4 billion euros previously outlined in July.
URW executives said there was strong appetite for some shopping centre operations, which would see the group sell off stakes and run some as joint ventures.
The company gave an upbeat outlook for the sector’s gradual recovery, though some U.S. malls are closed. Footfall is 80-90% of last year’s levels in most of Continental Europe, it said.
“The business update is quite encouraging for continental Europe where sales are converging to last year levels in most countries,” analysts at brokers Degroof Petercam said in a note, adding that the size of the capital hike “seems sufficient to restore the balance sheet”.
URW is also making headway in renegotiating rental contracts with tenants, company executives said, with 61% of planned discussions now settled.
However Chief Executive Christophe Cuvillier said the group’s business was lagging in the United Kingdom, where it had struggled to enforce some rental payments.
“It’s not acceptable that strong, healthy retailers - some of which were allowed to stay open during the lockdown - are not paying not only their Q2 but also their Q3 rents,” Cuvillier told an analyst conference call.
($1 = 0.8486 euros)
Reporting by Sarah Morland in Gdansk and Sarah White in Paris; Editing by Alexander Smith and Pravin Char
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