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Intu plummets 33% after it cans capital raise

Lack of support puts the debt-laden group in a precarious position.
Intu Eldon Square in Newcastle, one of the largest CBD shopping destinations in the UK. Image: Tony Hall

Beleaguered British shopping centre owner Intu’s share price haemorrhaged more than 33% to a record low on Wednesday after it announced that it has abandoned plans for a capital raise of between £1 billion and £1.5 billion.

The debt-laden group, which is listed on both the London and Johannesburg stock exchanges, had aimed to use funds from the planned capital raise to strengthen its balance sheet.

Read: Intu confirms equity raise in face of UK woes, debt burden

Lack of support for the capital raise has put the group in a precarious position, with around £190 million of its current £4.5 billion debt burden becoming due within the next 12 months.

“Intu Properties plc has been reviewing a range of options to fix its balance sheet and establish a more appropriate long-term capital structure,” it said in a JSE Sens statement. “Intu has, over the past several months, engaged in extensive discussions with its shareholders and potential new investors regarding a possible equity raise of between £1 billion and £1.5billion. Following these discussions Intu has concluded it is unable to proceed with an equity raise at this point.”

It added: “While a number of Intu’s shareholders and potential new investors indicated their support for an equity raise, the board believes the current uncertainty in the equity markets and retail property investment markets precluded a number of potential investors from committing capital into the business and Intu was therefore unable to reach the target quantum at the current time.”

Read: Growthpoint is not overpaying for Capital & Regional, says Sasse

The group said that during the process, it had however received several expressions of interest to explore alternative capital structures and asset disposals. It did not go into detail on this.

“Intu will continue and broaden its conversations with its stakeholders with a view to discussing the range of options available to the company to demonstrate the equity value of the business and to utilise its assets to provide further liquidity … Intu will also continue to keep under review the feasibility of an equity raise,” it noted.

Read: Intu share price plunges as Brexit thwarts buyout offer

In the face of Brexit and the UK’s retail industry woes, Intu’s share price has plunged more than 90% over the last year and by more than 95% in the last three years. Besides Brexit, online retail has had a massive negative impact on UK retailers and shopping centre owners.

In its Sens statement on Wednesday, Intu also provided a trading update ahead of the company releasing its interim results next week. While it highlighted slight increases in footfall at its centres overall and stable occupancies at 95%, the group revealed that its portfolio had been devalued by some £2 billion in 2019.

“The independent valuations of Intu’s portfolio at 31 December 2019 delivered a valuation deficit of £2 billion for 2019, a like-for-like decrease in value of 22% for the year and around 33% from the peak valuation in December 2017.

“Weak sentiment rather than hard transactional evidence has been the key driver in the valuation deficit with net initial yield (topped-up) increasing by 95 basis points to 5.93%,” it said. 

 

Intu share price

 

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If the BV is correctly stated, P/BV is 0.05x. If liquidated and you get 10c on the Rand, you double your money. Truly perplexing!

Yield is King – with or without the ‘’Coronavirus”
‘’The only way to get rid of a temptation is to yield to it’’
Oscar Wilde.
I am ad nausea writing reports, trying to convince my old ex FX colleagues (some managing their client’s books on an outsourced basis), that the smart money will start flowing back into sunny SA again due to the high yield that most emerging markets offer.

Pension World Reels From ‘Financial Vandalism’ of Falling Yields
By
Anchalee Worrachate

‘’A once-unthinkable collapse in global bond yields is forcing pension funds to buy bonds that offer negative returns — putting the financial security of future retirees in jeopardy.
U.S. institutions managing trillions of dollars in retirement savings — including the California Public Employees’ Retirement System — have been ratcheting down return expectations. Japan’s Government Pension Investment Fund, the world’s largest, has warned that money managers risk losses across asset classes. In Europe, pension funds may be forced to cut benefits in part thanks to the decline in rates.
Investors were already taking on more credit risk to make up for dwindling income elsewhere, with some chasing less liquid markets like private debt. Now, negative yields on over a quarter of investment-grade bonds — with more monetary easing to come — are increasing the urgency for portfolio managers to find new sources of returns’’

ad nausea Zimboland have been trying to get investors to make use of their higher yields

The UK once again, pounding down SA shareholder value.

And that’s the offshore everyone wants to go to.

End of comments.

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