New Look, the struggling British fashion retailer, has announced its plans for a second major restructuring of its store estate in just three years. The company is seeking new lease terms based on turnover for its stores and is asking landlords to agree to this change. Alongside this restructuring, New Look has also secured a recapitalization deal. In collaboration with its financial adviser, PWP, the company will explore potential interest from strategic and financial investors in purchasing New Look shares or assets.

In 2018, New Look underwent a company voluntary arrangement (CVA), which resulted in store closures and rent reductions. However, due to the significant impact of COVID-19 on its financial position, the company finds it necessary to pursue another CVA. This time, the focus is on resetting the rental cost base to reflect market rent through a turnover-based model. This model will take into account the future performance of the company and the wider retail market. The CVA is expected to be launched on August 26.

Despite reopening the majority of its stores in the UK and Ireland, New Look has reported a 38% decline in store sales on a like-for-like basis since June 1. This decline is primarily attributed to reduced footfall caused by the ongoing pandemic.

In addition to the restructuring plans, New Look has reached agreements with its banks and bondholders on the terms of a recapitalization. The debt for equity swap will significantly reduce senior debt from approximately £550 million to around £100 million, leading to substantial interest cost reductions. The company will also benefit from a longer working capital facility and a £40 million injection of new capital.

Nigel Oddy, CEO of New Look, emphasizes that the proposed recapitalization is vital to the company’s long-term strategic plans and to safeguarding the jobs of its 12,000 employees. However, the success of the recapitalization relies on obtaining support from landlords for the upcoming CVA.

This latest restructuring follows a similar process that took place in January 2019. As a result, New Look’s main shareholders currently include South African investment firm Brait, as well as Alcentra, Avenue Capital, and CQS. The company is hopeful that with the support of its stakeholders, it can secure a stronger financial future and overcome the challenges brought about by the COVID-19 pandemic.

Useful links:
New Look Group Investor Relations – Restructuring Update 2020
Retail Gazette – New Look to launch second major restructure in three years