New Look's CVA gets green light from landlords
New Look’s company voluntary arrangement (CVA) proposal has today been approved by a majority of its creditors, saving over 11,000 jobs.
As a result of the CVA, the majority of its stores (402 stores) will switch to turnover-based rents, with a further 68 stores paying zero rent.
Upon completion of the deal, the company said it would lead to the following benefits:
- Materially reduce its long-term debt at the operating companies from £550m to £100m of bank facilities with an extended tenor to 2024
- Provide access to an operating facility of £70m to provide supplier and other working capital financing with an extended tenor to 2023
- Remove the existing bonds of £440m in consideration for equity and a small shareholder loan which will have no cash debt service costs, leaving New Look’s cash interest burden substantially reduced by more than £30m per annum, and no bond debt at the operating entities including New Look Retailers Limited
- Obtain a new cash investment of £40m into New Look to invest in the business and assist in fulfilling its long term strategy
This is the second CVA for the chain in two years. In 2018, creditors approved a CVA for New Look that led to 60 store closures and almost 1,000 job cuts.
It was not a foregone conclusion that its latest proposal would get the go-ahead after landlords pushed back against it, in what was seen as a bid to deter others from seeking the controversial turnover-based rent terms.
New Look CEO Nigel Oddy said in a statement: “I would like to take this opportunity to thank our landlords and creditors for their support for our CVA, which, alongside the consequential financial restructuring that will now be progressed, will provide us with enhanced financial strength and flexibility, and a sustainable platform for future trading and investment.
“We still fundamentally believe the physical store has a significant part to play in the overall retail market and our omni-channel strategy. We look forward to working closely with our landlords and all creditors to ensure we can navigate the uncertain times ahead together.
“Over the course of the last three years we have successfully implemented our turnaround plan: returning to the proven broader appeal product and value led pricing that we are known for, fundamentally realigning our supply chain to be faster and more flexible; making our omni-channel model more cohesive than ever; driving operational efficiencies; and bringing in new talent across the business.
“The impact of COVID-19 has reinforced this relentless focus on our customer-orientated strategy. As one of the UK’s leading womenswear retailers, New Look is a brand that has inspired tremendous loyalty over the past 50 years and we are determined to enhance our position as the leading convenient broad appeal fashion destination loved by 25 to 45 year olds as we navigate the post-COVID-19 landscape.”
Daniel Butters, CVA supervisor at Deloitte said: “The approval of the CVA is an important milestone in New Look’s restructuring, enabling the business to move forward.
“The CVA will provide a stable platform for its management team’s strategy and we wish them well for the future.”
Had the deal failed to gain approval, online fashion group Boohoo was said to be circling with an eye on adding the New Look brand to its line-up. It would have been unlikely to have taken on any or many of its stores, however.