St Modwen Properties estimates that it can survive a 40% fall in its portfolio value before reaching its loan-to-value covenants.
In a stock market update, St Modwen said: “The short-cycle nature of our developments allows us to dial down activity quickly in the current environment, so our residual committed expenditure is to a meaningful extent covered by contracted cash receipts from disposals.
“Stress-testing our assumptions, we estimate our portfolio could currently withstand a 40% fall in value before we reach our closest LTV covenant, prior to any potential mitigating actions, such as disposals.”
The company added that a stress test for its interest cover covenants suggests it will also have headroom even under a “severe and prolonged downturn” that includes “a very significant fall in housing sales for the remainder of the year and a substantial and sustained fall in retail rental income”.
St Modwen said that it is currently impossible to predict the impact of the Covid-19 virus on its financial results, but that its disposals over recent years of retail assets and land in London have left it with a “robust” business.
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