Analysts warn on C&R Mall fund holding

  Capital & Regional plans to raise £300m through a heavily discounted rights offer will see its shareholding in its Mall Fund dwindle by 15%, analysts have warned.   C&R currently owns around 24% of units in the £2.9bn shopping centre investment fund. Analysts said that C&R would be unable to buy any of the units itself, given its cash situtation.   The rights offer has been launched in a bid to avoid breaching its loan to value covenants on the Mall Fund.   EG revealed that The Mall was dangerously close to being in breach of the covenant in February and that it was exploring a wide range of measures to improve its liquidity (2 February, p31).   C&R this week sent out a notice to all its unit holders saying it would sell off the shares at around a 50% discount. The equity issue is to be underwritten by Norwich Union – the fund managed by C&R’s largest unit holder Morley Fund Management.   The rights issue is understood to form part of a review of C&R’s Mall and Junction funds, being led by Morley. Both funds have suffered from large declines in the value of retail property.   In a bid to avoid breaching covenants on both funds, C&R has put around £300m of assets in each up for sale.   Discussions to sell a portfolio of shopping centres to Bridehall Developments and Carlyle Group are understood to be continuing, although the original offer price has been chipped.   Five retail parks are also being offered for sale from the Junction Fund, including a 153,000 sq ft park in Slough, the 350,000 sq ft St Andrews Quay in Hull and the 313,000 sq ft Telford Forge in Telford.   C&R said: “We referred to this project in our interim management statement on 16 May, saying that it was well progressed, and that we would make a more definitive statement in relation to this initiative before the end of May. This remains the position.”   Shares in C&R peaked at £17 last February, but closed down 7.25p yesterday at £3.02. samantha.mclary@rbi.co.uk