New Look CVA hangs in balance as landlords push back

New Look is reported to have faced resistance from 10 landlords over its CVA proposal which seeks to switch the majority of its stores to turnover-based rents.

The young fashion retailer put forward a plan to switch more than 400 stores to turnover-based contracts and to pay zero rent on 68 stores at the end of last month.

Its proposal was met with an immediate objection from the British Property Federation which accused the business of using the CVA process to "rip up" leases permanently, rather than using a CVA to provide temporary relief which is the intended purpose of the procedure.

This Is Money reports that 10 landlords have rejected the plan, which is due to be put to a vote on 15 September.

Some sources suggest that landlords may wish to be seen to be objecting to the deal in order to deter others, as a number of retailers are seeking to switch to turnover-based rents as part of CVAs. AllSaints is among those who have successfully negotiated turnover-based rent deals as part of a CVA

When announcing the CVA, New Look CEO Nigel Oddy insisted the move was being made out of "absolute necessity".

"[We] are calling on our landlords to agree a turnover rent model for our stores which will put us into a position to be able to complete a financial restructuring agreed with our creditors that will secure the future of New Look and our employees. The proposal to landlords is to rebase our rental cost base through a turnover-based model that aligns future performance and reflects the wider retail market," he said.

Ann Summers, Moss Bros and River Island are among the big chains said to be considering a CVA, while Hotter Shoes recently won approval for a CVA which enabled it to close 46 of its stores.