Shares in Intu fell sharply after the indebted shopping centre owner confirmed it would push ahead with a cash call thought to be worth as much as £1bn.
Intu, which owns shopping centres including the Trafford Centre in Manchester and Lakeside in Essex, said it would attempt to tap investors for funds alongside its full-year results at the end of the February, confirming reports.
The company has been hit by the weak backdrop for high street retailers, with struggling groups including Arcadia and Debenhams occupying a lot of space in its centres.
While Intu did not confirm how much it planned to raise, the figure is thought to be around the £1bn mark.
“Further to recent press speculation, Intu properties plc continues to make progress in its strategy to fix the balance sheet,” the company said in a market announcement on Monday. “Consistent with previous announcements, this now includes targeting an equity raise alongside its full year results at the end of February.
“The company is currently engaged in constructive discussions with both shareholders and potential new investors on the proposed equity raise.”
The news sent shares down 7% in morning trading to another new low of 21p. Intu’s share price has plunged more than 80% over the past 12 months, slashing its market value to £290m. That is just a fraction of the £8bn at which its properties are officially valued.
While Intu’s chief executive, Matthew Roberts, said the company’s occupancy rate remained “stable” at about 95%, it has been affected by cuts in rental payments by some of its key tenants that have undergone emergency financial restructuring.
Intu is struggling with £5bn of debt and has been trying to sell properties to try to lighten the load.
Roberts said: “We are making good progress with fixing the balance sheet, our number one priority, and are confident we have the right strategy in place to enable us to prosper as we see continued polarisation between the best destinations and the rest.”
While the value of the cash call has not been confirmed by the company, Matthew Saperia, a property analyst at Peel Hunt, believes £1bn in equity could fall short of the amount required. He said Intu needed to sell at least £1bn worth of properties and raise £1.3bn through an equity rights issue.
He said: “We don’t think we’re at the bottom in terms of the repricing of retail assets in the UK, so again there is still I think further downside in terms of asset valuation and indeed rental values. So recapitalising the business now is not a sign that we’re necessarily at the bottom.”
Russ Mould, the investment director at AJ Bell, said Intu could end up attracting investors looking for a discount. “In theory everything has its price and Intu is trading at extremely deep discounts to net asset value of its business,” he said.
“Now clearly, with the shares being where they are already, the market is telling you we don’t believe the net asset values. But to suggest that these properties have negligible value I think is probably laying it on a bit thick.
“But in the short term it’s a retail play and it’s an area where there isn’t a lot of good news flying around.”