New Look secures £40m lifeline with creditors and plans CVA

New Look creditors recapitalisation Nigel Oddy
The fashion retailer will have funding to provide a "sustainable platform" for trading post-Covid
// New Look secures agreement with creditors to invest in strategic business plan
// The transaction will deliver a new money investment of £40 million

New Look has launched a major restructuring of its finances to reduce its costs after sales were hit by the coronavirus pandemic.

The fashion retailer said it was asking landlords to accept new lease contracts on its stores which are based on turnover as it battles the “challenging retail market environment”.

It also said it would launch CVA proposal to help bring down its rent and “safeguard 12,000 jobs” at the business. Creditors will vote on the CVA later this month.

READ MORE: New Look prepares to launch CVA

New Look said 459 of its 496 stores have reopened since lockdown eased, but it has reported a 38 per cent drop in like-for-like store sales due to the “continued impact of Covid-19 on footfall”.

The retailer also said it has now launched a sale process as it looks to determine interest from investors for its shares and assets.

Meanwhile, the business secured an agreement with financial creditors to “rebase” its existing leasing portfolio.

The transaction will extend New Look’s facilities, deliver a new money investment of £40 million and significantly de-leverage the balance sheet.

The fashion retailer will have funding to provide a “sustainable platform” for trading post-Covid and allow it to invest in its strategic business plan.

The retailer’s current debt will be reduced from £550 million to £100 million.

“As has been the case for many retailers, New Look’s financial position has been significantly impacted by Covid-19, and over the past five months we have had to take a number of tough but necessary decisions and actions to manage the impact this has had on our business and our people,” New Look chief executive Nigel Oddy said.

“As a result of taking decisive measures to preserve and maximise liquidity since the onset of the pandemic, we have maintained our cash position through the lockdown period, and this has also in part been helped by strong online trading.

“I am pleased that we have now safely reopened 459 stores. However, current trading remains impacted by the decline in footfall seen right across the retail market, and with the pandemic ongoing and social distancing measures in place for the foreseeable future, it remains difficult to accurately forecast the sales recovery rate.

“Given this, and the extent of our deferred obligations, future expected costs and the likely permanent structural shift in customer spend and behaviour from physical retail to online, we are seeking additional capital for the business and a recapitalisation of our balance sheet to ensure we are as well positioned as we can be going forward in the post-Covid retail operating environment.

“Additionally, out of absolute necessity, we are preparing to launch a CVA that would reset our rental cost base back to market rent through a turnover-based model that fairly reflects the future performance of the Company and wider retail market.

“We are pleased to have already gained backing from our banks and bondholders for our recapitalisation, and we are grateful for their support and the concessions they have made over recent times.

“However, this recapitalisation – which will enable us to deliver our long-term strategic plans and safeguard 12,000 jobs – can only be delivered if we secure the support of our landlords for our forthcoming CVA.

“New Look is a brand that has inspired tremendous loyalty over the past 50 years and has earned its place as one of the UK’s leading womenswear retailers.

“We are confident in our plans to build on these strong foundations with our revitalised broad appeal product ranges, and this transaction will allow us to secure our future for the benefit of all stakeholders as we navigate the post-Covid landscape.”

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