New Look gets creditor approval for CVA plan

New Look has gained creditor approval for its Company Voluntary Arrangement (CVA) proposal at a meeting yesterday where the majority voted in favour.

The fashion retailer’s plan had come up against some criticism due to its model of moving 400 UK stores to a turnover-based rent model, with a three-year rent holiday on its 68 remaining stores, along with enhanced landlord break clauses.

Crucially, this structure meant there would be no store closures or job cuts. New Look stated that the approval will also bring an extension of current recapitalisation facilities, new investment and significant de-leveraging of the balance sheet.

The strategy includes a debt-for-equity swap which will lower senior debt from £550 million to £100 million, along with an extension of primary working capital facilities and an investment of £40 million of new capital.

Chief executive Nigel Oddy thanked its landlords and creditors for their support, which “will provide us with enhanced financial strength and flexibility, and a sustainable platform for future trading and investment”.

He continued: “We still fundamentally believe the physical store has a significant part to play in the overall retail market and our omnichannel strategy – we look forward to working closely with our landlords and all creditors to ensure we can navigate the uncertain times ahead together.”

Daniel Butters, supervisor at Deloitte, which handled the CVA, added: “The approval of the CVA is an important milestone in New Look’s restructuring, enabling the business to move forward.”

Commenting on the news, GlobalData senior apparel analyst Chloe Collins said that the CVA will set a precedent for other retailers to suggest turnover-linked rent agreements for their struggling estates in the wake of COVID-19.

“However, New Look is such a big player in the market and would, upon collapse, have left over 400 empty stores on high streets and in shopping centres, so smaller retailers must think twice before assuming similar CVA’s would be approved, given they may not be as important to landlords.”

She also pointed out that with New Look now unable to exit any of its stores within the next three years, its investment will be thinly spread, with store refurbishments needed to entice shoppers, as well as online developments such as better delivery options and impactful digital marketing.

“In order to turn around performance, it is crucial that it focuses on clearly identifying its target customer, with its ‘broad appeal’ ranges failing to stand out against rivals such as PrettyLittleThing and Zara.”

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