// British Property Federation slams New Look’s CVA over inaccuracies
// New Look is hoping landlords’ approval of the proposal will secure funding from its lenders
The British Property Federation has criticised New Look for inaccuracies in its CVA proposal, which will move the majority of its UK stores’ rent to a turnover basis to reflect the current market environment.
The membership organisation refuted the retailer’s case that its CVA proposal reflects its views on best practice.
New Look launched a CVA on Wednesday, seeking a three-year rent holiday on 68 of its stores, and a switch to turnover based leases on 402 other stores.
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“New Look and Deloitte have launched this CVA with reference in their communications that the British Property Federation’s views are reflected in the proposal – this is not true,” British Property Federation chief executive Melanie Leech said.
“While New Look and Deloitte engaged with us and this resulted in some changes to the proposal, this still fails to meet our best practice standards for CVAs and contains terms that property owners will object to.
“CVAs should not be about permanently ripping up leases – they are supposed to be a temporary measure, as part of a wider rescue plan, to get a business back onto its feet.
“Property owners absorb significant losses during a CVA to support a business’ future, and in return expect the support measures within a CVA to come to an end upon termination of the CVA.
“New Look is using this CVA to permanently re-write its leases, this proposal is not about a time-limited rescue plan.
“Property owners are increasingly supporting turnover-based rent models underpinned by collaboration and transparency, but CVAs should not become a mechanism to enforce this.
“We understand the challenges facing the retail, hospitality and leisure businesses on our high streets, which are at the sharp end of the Covid-19 pandemic.
“CVAs, however, must not unfairly compromise property owners, who need to consider the impact on their investors, including the millions of people whose savings and pensions are invested in commercial property.”
New Look is hoping landlords’ approval of the proposal will secure funding from its lenders. Its debt holders have agreed to inject £40 million into the business and reduce debts by around £440 million to £100 million.
The fast fashion retailer said this financial arrangement would provide it with “financial strength and flexibility to deliver a sustainable platform” for post-Covid trading.
However, the restructure is conditional on a rebasing of New Look’s UK leasehold obligations through the CVA.
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