Watford Borough Council has explained what could happen to the town's indoor shopping centre if intu goes into administration.

intu Properties, which runs 17 malls in the UK, is in deep financial trouble with debts of £4.3 billion

The company was not in the best shape financially before the coronavirus pandemic, but the situation has worsened because many retailers have chosen not to pay intu rent whilst the shops have been closed.

According to Sky News, the company has administrators KPMG on standby if lenders fail to agree to an extended time period for intu to repay its debts.

But what do intu's finances mean for the future of our shopping centre?

Watford's shopping centre became one of the top 20 places to shop in the UK following the completion of the £180 million extension, which was fully funded by intu.

intu's annual report for 2019, published in March this year, shows footfall at intu Watford was up by 15 per cent following the extension - a bigger increase than any of its other centres.

Visitors flocked to the new bowling alley and cinema while Debenhams was the stand-out addition to the shopping scene.

Watford Observer:

But intu's extension suffered a huge blow earlier this month when Debenhams announced it would not be reopening its Watford store - not even two years after it opened for the first time.

We questioned Watford Borough Council on the state of intu's finances and what it could mean for economic future of the town.

Council's ownership of shopping centre site

There can be no doubt that Watford Borough Council - intu's landlords in Watford - are concerned about intu's financial plight and what it could mean for the economic future of Watford.

However, the council does have some control over the shopping centre if the worst does happen.

Lakeside in Essex and the Trafford Centre in Manchester are two examples of shopping centres wholly owned by intu - however intu does not own the former Harlequin in Watford outright.

Watford Borough Council has a 7 per cent stake in intu Watford, and intu has the remaining 93 per cent.

The council also has the freehold on the intu Watford site.

intu leases the shopping centre from the council - in fact it has long-term leasehold interests over the centre, meaning the lease is marketable to another company if intu were to leave.

The lease does contain the covenants that allows the council to step in, in the event of insolvency.

The council receives £890,000 per annum in rental income from intu, which the council says has been paid to date.

The council says owning the freehold not only gives regular income but also means it has a say in any development of the site.

Watford Observer:

What happens if intu do go into administration?

If intu were to go into administration, and this could potentially happen within ten days, it would appoint a receiver - commonly this is a bank or other creditor which has charge over most, if not all, of a company's assets.

The council says the receiver would still have to continue to comply with the lease terms whilst running centre, including paying rent to the council.

The receiver would likely look to find a buyer for the lease which would mean intu Watford could continue to stay open.

Watford Observer:

We asked the council if it was "confident" Watford's shopping centre would survive if intu did enter administration.

A spokesperson said: "Watford has one of the highest occupancy rates of a town centre in the UK and at a time when we see many town centres struggling across the country, Watford has continued to buck the trend with increases in footfall.

"We want intu to continue operating our centre and believe investing in our town is an attractive proposition for many businesses."

intu Watford reopened dozens more of its shops on Monday, in line with the rest of the country, and more stores have reopened elsewhere in Watford town centre.

The council is encouraging shoppers to come into town as long as they obey the social distancing measures that have been introduced.