High street fashion giant New Look has been dealt a fresh financial blow as a key insurer cancelled its cover against insolvency to its suppliers.
According to The Times, leading credit insurer Euler Hermes has stopped selling cover on new shipments of goods to the retailer, though some “residual” cover reportedly remains for its clients with existing orders.
Other insurers, including QBE, are understood to have reduced levels of cover for the fashion retailer.
The move demonstrates a concerning lack of confidence in New Look, which has been struggling with falling sales and is being dragged down by a £1 billion debt pile.
Credit insurance protects suppliers in the eventuality that a customer goes bust before the payment for an order can be made.
Refusing to provide cover lays bare a growing lack of confidence in the retailer.
The ramifications can damage more than investor confidence, as suppliers will demand payment upfront when insurance is not available.
BHS, Woolworths and Comet all saw their insurers cancel cover before their collapse.
The recent Steinhoff accounting scandal has driven the fresh lack of confidence in New Look.
Christo Weise, Steinhoff’s largest shareholder who recently stepped down as chairman and interim chief executive, also holds the largest stake in New Look’s parent company Brait.
Brait purchased a 90 per cent stake in New Look in 2015, before writing down the retailer’s value to zero in November after it wracked up a £10.4 million loss.
New Look states it has “adequate liquidity” to help it through the rough patch, although it faces a bond payment of £40 million in May and has seen bonds trading at between 20 per cent and 40 per cent of their face value in recent weeks.
Click here to sign up to Retail Gazette‘s free daily email newsletter
