TIDM69ZM
RNS Number : 6757S
Intu Debenture PLC
17 November 2021
Intu Debenture PLC
Q3 Update Call Recording Available
INTU DEBENTURE PLC
LEI: 213800UX3TM5RGB1UF29
GBP354,876,000 5.562 per cent. First Mortgage Debenture Stock
2027
INTU DEBENTURE PLC (THE "COMPANY") ANNOUNCES Q3 UPDATE CALL
RECORDING AVAILABLE ON COMPANY WEBSITE
17 November 2021
Stockholder Call Recording Available
Further to the Company announcement made on 3 November 2021 (the
"Q3 Update Call RNS") announcing a call with Stockholders to
provide an update in respect of both trading numbers in the
financial quarter ending on 30 September 2021 and with respect to
the timing to issue a Notice of Meeting at which Stockholders would
be asked to approve an Extraordinary Resolution regarding the
proposed amendment and restructuring transaction (the "Q3 Update"),
the Company announces that a recording of the Q3 Update Call, which
took place at 9:30am GMT on 16 November 2021 (the "Q3 Update
Call"), is now available on the Company's website at
https://debentureplc.com/quarterlyreports/.
On the Q3 Update Call, directors of the Company and individuals
from APAM Limited, the Company's asset manager ("APAM") presented a
brief overview of the Q3 Update (the "Q3 Company Presentation") and
answered queries from those Stockholders who registered to attend
in accordance with the procedure set out in the Q3 Update Call RNS
(the "Q3 Stockholder Q&A Session").
No commercially sensitive or price sensitive information was
discussed or disclosed during the Q3 Company Presentation or during
the Q3 Stockholder Q&A Session, save for such information that
had previously been publicly discussed or disclosed. High-level
summaries of both the Q3 Company Presentation and the Q3
Stockholder Q&A Session are provided below. Such summaries
provide neither an exhaustive nor a complete description of the Q3
Company Presentation or the Q3 Stockholder Q&A Session and
should be considered as summaries only. Stockholders who are
interested in the matters discussed during the Q3 Update Call are
encouraged to review the recording of the call.
Q3 Company Presentation
During the Q3 Company Presentation directors of the Company and
individuals from APAM provided an overview of the Debenture Plc
Stockholder Update Report Q3 2021 dated 9 November 2021, which is
available on the Company website at
https://debentureplc.com/quarterlyreports/. Key points arising from
the Q3 Update that were noted by the Company and APAM included:
-- The Debenture Group's available cash position as at 30
September 2021 was approximately GBP19 million, which reflected a
positive variance of GBP6.6 million to the forecast of GBP12.3
million as at the end of September 2021. APAM noted that this was a
consequence of some permanent matters such as improved levels of Q3
2021 rent and service charge collections and some matters which
were of a more temporary nature, including a deferral of expenses
and certain capital expenditure ("capex") and other cash
preservation initiatives. Given the short-term factors contributing
to the relatively healthy available cash position, APAM noted that
the Debenture Group is continuing to tightly manage liquidity with
a forecast cash balance of GBP19.5 million to January 2022
-- APAM noted that since the end of Q3 2021, rent and service
charge arrears have continued to be collected, and there is now a
combined collection of rent and service charges reflecting 79 per
cent of the rents and service charges billed in Q3 2021 as at 25
October 2021.
-- In Q3 2021, nine new leases were completed, which secured an
additional GBP270,000 per annum in rent. The trend in new leases is
for a shorter lease period with the inclusion of break and turnover
rent clauses. The rents are also rebasing at a lower level than
passing rent within the shopping centres. APAM highlighted that
there is a trend emerging in tenant requests for capex rather than
rent free periods, which is likely to have an impact on
cashflow.
-- In respect of lease renewals, APAM noted that they are
relatively successful in retaining existing tenants, however, there
is a downward trend in rent from that being charged prior to the
renewal. Of the 13 lease renewal transactions in Q3 2021, the
rental level agreed was GBP0.58 million per annum below the
previous passing rent. In terms of renewals, the average term has
also generally been shortened and is now, on average, at a 3-5 year
term as opposed to a 10 year term.
-- In terms of regulations, APAM highlighted that the moratorium
preventing landlords taking action in respect of rent arrears has
been extended to March 2022. The Government of the United Kingdom
has started to clarify the arbitration process it intends to impose
for COVID-19 rent arrears. In any event, this arbitration process
will not be available to landlords until at least March 2022.
-- In terms of both the true-up exercise being conducted under
the Transitional Service Agreement with the Administrators of the
wider Intu Group (which is expected to result in certain refunds
being delivered to the Debenture Group) and the broader
restructuring transaction, the Company noted that the timing is
being set by the Administrators and is outside the immediate
control of the Company. The Company noted that it is, however,
doing everything it can to maintain momentum and is targeting
completion for both the restructuring and the true-up refunds in Q1
2022.
-- APAM and the Company are reviewing the business plan for the
Debenture Group and targeting having a revised business plan
prepared by the end of Q1 2022, which will require further
strategic thought and analysis of (1) a feasibility study for the
ski centre at Xsite; (2) a shared vision for the Eldon Square site
with Newcastle City Council (which holds the freehold to Eldon
Square); and (3) a utilisation plan for space left vacant at both
Eldon Square and the Potteries shopping centres vacated by
Debenhams.
-- APAM noted that it is targeting having an updated Q1 2022
cashflow issued in the week commencing 20 December 2021.
-- In terms of asset valuations, the assets are valued every 12
months at the end of the year. As in years past, CBRE has been
appointed as the valuers and APAM has scheduled meetings in early
January 2022 to finalise the valuation process.
Q3 Stockholder Q&A Session
During the Q3 Stockholder Q&A Session, Stockholders which
registered to attend in accordance with the procedure set out in
the Q3 Update Call RNS, raised the following key questions, with
relevant summaries of responses from the Company and/or APAM being
provided as follows:
1. Stockholder Question: Can the Company share more information
on the discussions taking place with Newcastle City Council in
respect of Eldon Square?
Company / APAM Response: The situation is complex as Newcastle
City Council owns the freehold to Eldon Square and the Company
occupies the shopping centre under a number of complex long
leasehold arrangements. The Company makes payments on the basis of
both a fixed ground rent and a share of net rental income. The
Company's objective is to improve the terms of its long lease
arrangements and the objective of Newcastle City Council is focused
on the long term look and feel of the city. There is no obvious or
easy way to align these objectives and it is expected to take a
period of time before the Company and Newcastle City Council arrive
at a shared vision for the site, with the caveat that it is
possible that no shared vision will ever be achieved.
2. Stockholder Question: How much uncollected rent is there in total, including service charges?
Company / APAM Response: Total arrears across the Debenture
Group's portfolio in Q2 2021 was just over GBP18 million and by the
end of Q3 2021, total uncollected rent and service charges is now
just over about GBP16 million.
3. Stockholder Question : Is there a strategy in place for XSite
and what considerations are being given to an exit from this
site?
Company / APAM Response: Although the ski slope has always been
let, the element that impacts liquidity is the failure of the
tenant to pay rent during and prior to COVID-19, which has resulted
in significant rent arrears. Discussions are ongoing at a
commercial level.
4. Stockholder Question: How much capex does the Company require
to re-engineer the Snow Factor unit at Xsite and is there likely to
be a need for additional cash funding into the Debenture Group?
Company / APAM Response: There are a wide-range of possibilities
for the site, including finding a new tenant or entirely
re-configuring the site for alternative uses. The Company is
currently still working to quantify the amount of capex required
for the various options. However, its working assumption is that
the only capex that can be incurred is from the cash available to
the Company through rent collections. At this point, there is no
intention to request capex from the Stockholders or to request
provisional funding. The Company's overarching priority is to
prioritise those capital projects that will give the greatest
enhanced value and it is a matter of prioritising the capital
projects on which to deploy the Company's limited resources.
5. Stockholder Question: In terms of the trend to include capex
instead of rent-free in new leases and lease renewals, does the
Company consider the cash-drag on capex being offset by the lower
rent free periods?
Company / APAM Response: The capex is not having a negative
impact on the level of rent that can be agreed with tenants. In the
trade-off between rent-free and capex, the cash-flow is similar
over the life of the lease. Capex as part of these transactions
does place immediate strain on cash-flow even though it may all
work out similarly in the long-term.
The Company will continue to keep Stockholders notified of any
relevant developments in accordance with applicable law and
regulation.
Capitalised terms used in this Notice and not otherwise defined
shall have the meanings given to them in the Supplemental Trust
Deed dated 30 July 2020 and the trust deed dated 5 October 2006 (as
amended and supplemented from time to time and together with the
Supplemental Trust Deed, the "Trust Deed") constituting the Stock
and made between the Company, the Charging Subsidiaries (as defined
in the Trust Deed), and The Law Debenture Trust Corporation p.l.c.
(the "Trustee"), unless the context otherwise requires.
Please note that the Trustee has not been involved in the
preparation or formulation of the Q3 Update, this announcement or
any announcement in respect of the Q3 Update or the Q3 Update Call
and did not participate in the Q3 Update Call and expresses no
views or opinions on the Q3 Update or the Q3 Update Call or this
announcement. Stockholders are advised to take their own legal,
financial and/or tax advice in relation to the Q3 Update and the Q3
Update Call.
Stockholders should contact the following for further
information:
Company
Simmons & Simmons LLP
Citypoint
1 Ropemaker Street
London
EC2Y 9SS
United Kingdom
Email: intu@simmons-simmons.com
Attention: Peter Manning and James Taylor
Registrar
Link Group
10th Floor
Central Square
29 Wellington Street
Leeds
LS1 4DL
United Kingdom
Telephone: +44 371 664 0300
(Calls are charged at the standard geographic rate and will vary
by provider. Calls outside the United Kingdom will be charged at
the applicable international rate. Open between 09:00 -17:30,
Monday to Friday excluding public holidays in England and
Wales)
Email: shareholderenquiries@linkgroup.co.uk
Alvarez & Marsal Europe LLP and Milbank LLP have been
retained as financial and legal advisers to an ad hoc group of
Stockholders. Their contact details are as follows:
ProjectIrisAMTeam@alvarezandmarsal.com and Iris@milbank.com.
This announcement is made by Intu Debenture PLC
Dated: 17 November 2021
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END
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