New Frontier Properties has breached its banking covenants, with the value of its UK shopping centres plummeting by £78.6m.
The South African-listed property firm said the fall could be attributed to “recent CVAs, company receiverships and tough trading conditions across the UK retail sector.”
Several of its acquired retail assets have seen substantial annual falls in value.
The company bought Coopers Square in Burton upon Trent, the Cleveland Centre in Middlesborough and Houndshill Shopping Centre in Blackpool in 2015.
The value of each of these centres has dropped by around 30%.
With the value of its properties sliding, New Frontier has breached its loan-to-value covenants. As a result, HSBC has increased its interest rate margin from 2.35% to 3%.
“While the group has the support of its funders, its loan terms are effectively repayable on demand,” the company said.
To ease its debt burden, New Frontier will sell Stadium Business Park, its logistics property in Dublin, which is valued at just under £10m.
Earlier this year, the company served notice to HM Revenue and Customs to leave the UK REIT regime as its shareholder base was not sufficiently diversified.
Due to the fall in property values, the company said it will be unable to “obtain a tax deduction on its corporate expenses.”
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