Hammerson PLC (LON:HMSO) said its lenders have agreed to relax part of their terms for the next 18 months and it has increased its liquidity, but has so far collected just 16% of UK rents for the June quarter.
Coming just days after the collapse into administration of rival Intu, the FTSE 250 shopping centre owner said its lenders have agreed to relax the unencumbered asset ratio, which is the tightest covenant against declines in the valuation of its properties.
The covenant has been temporarily reduced from 150% to 125% for 18 months and is then set at 140% from October 2021.
Analysts estimated Hammerson will now be able to withstand a valuation decline of around 30% to 34% during the 18-month window of its unencumbered assets such as UK shopping centres and retail parks.
As well as drawing down a further £300m from its bank facility the company has been approved for £300mln from the Bank of England’s Covid Corporate Financing Facility, increasing potential liquidity to £1.5bn, including £500mln of cash.
Hammerson said the covenant relaxation “provides additional headroom to enable the company to continue with its strategy, including undertaking cross-portfolio disposals to strengthen the company's balance sheet”, though it will do so under a new chief executive after the resignation of David Atkins last month.
It added that it “is confident that collection rates will continue to improve materially in all regions as agreements are progressed with brands”, while today is the rent due date for its properties in France and Ireland.
The shares were up 4% to 83.38p on Wednesday morning.
“The rent collection stats highlight the impact Covid-19 is having on retail landlords,” said analysts Peel Hunt.
“The relaxed covenant is clearly helpful, but we forecast a peak LTV of c.55%, which we believe is still too high and a dilutive equity issue remains a real risk.”
Peel Hunt estimated Hammerson will be able to take a valuation decline of around 30% during the 18-month window, while those at Liberum put it nearer 34%.