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A portfolio of shopping centres once owned by Intu and valued at more than £2B is close to being restructured after its new owners agreed to a new £445M debt facility and found a retail veteran to serve as its chairman.
The SGS portfolio includes the Lakeside Shopping Centre in Thurrock and centres in Braehead, Nottingham and Watford totaling 4.6M SF and valued at £858M at the end of December. It has been controlled by creditors since Intu collapsed into administration in June 2020.
Those creditors — lenders and bondholders like UBS, Bank of America and HSBC — have now come up with a plan to refinance the portfolio and put it on more secure long-term financial footing.
The plan could involve an initial write-off of more than £400M, according to a proposal submitted to creditors. The portfolio has more than £1.3B of debt secured against it, £616M of which is due to mature this month.
A new lender has been found to provide a £395M senior loan and a £50M capital expenditure facility, according to the proposal. The £395M senior loan, to be provided by Lloyds Banking Group, would be combined with cash on the balance sheet of the company that nominally owns the portfolio to repay £503M of debt. The new loan would have a margin of 8.5%.
Remaining lenders and bondholders would see their debt converted into equity in a new company set up as the portfolio owner.
The plan means lenders would take full control of the portfolio, which had until now been an “orphan” company, owned by a charitable trust set up to manage it while a restructuring was being worked out. Hedge funds that bought into the debt would be the majority owners of the company.
Former Unibail-Rodamco-Westfield Chief Financial Officer Jaap Tonckens has been lined up as nonexecutive chairman of the new company.
The new structure was partly established to allow the assets to be sold more easily, albeit not straight away.
“Prime dominant shopping centres that have been supported by capex investment such as the SGS centres are now viewed as viable investments, providing strong cash-on-cash returns, in the face of structural changes and weakened market dynamics impacting other real estate sectors,” the proposal says.
After Intu’s administration, portfolio creditors brought in property company Global Mutual to manage the centres. Under its watch, the value and income of the centres have improved.
A valuation of £858M at the end of 2023 compares favorably to £744M at the end of 2021. Net rental income has risen from £66M in mid-2022 to £80M at the end of 2023.
The proposal predicts the value of the portfolio will rise, even if yields do not come down for shopping centres, due to improving income.
The restructuring would mean creditors owed a total of £800M would forgo repayment and convert their debt to equity. If the portfolio were sold today at the most recent valuation, they would miss out on about £440M.
Creditors holding about 52% of the debt secured against the assets have entered a lock-up agreement, indicating support for the proposal. Creditors will vote on the plan in the next two weeks.
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