UK retailer New Look seeks turnover-based rent in latest restructuring

* Proposes second CVA in three years

* Agrees recapitalisation with banks and bondholders

* Deal will reduce debt by 450 mln stg, inject new capital

* But conditional on CVA approval by landlords

* Store sales down 38% post-lockdown

LONDON, Aug 13 (Reuters) – Struggling British fashion retailer New Look on Thursday proposed a second major restructuring of its store estate in three years, this time asking landlords to agree new turnover-based leases across its portfolio.

Having closed stores and secured rent reductions from landlords through a company voluntary arrangement (CVA) in 2018, the firm said that with its financial position significantly impacted by COVID-19 it had no choice but to pursue another one.

“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,” it said.

The CVA is expected to be launched on Aug. 26.

New Look has reopened 459 of its 496 stores in the UK and Ireland since lockdown. Store sales are down 38% on a like-for-like basis since June 1 predominantly due to the continued impact of the pandemic on footfall.

It has agreed with its banks and bondholders the key terms of a recapitalisation.

These include a debt for equity swap that would reduce senior debt from about 550 million pounds ($720 million) to about 100 million pounds and significantly decrease interest costs, an extension of working capital facilities and an injection of 40 million pounds of new capital.

“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,” said CEO Nigel Oddy.

The proposed recapitalisation follows one in January 2019, which left New Look’s main shareholders as South African investment firm Brait, along with Alcentra, Avenue Capital and CQS.

In tandem with the recapitalisation, New Look’s adviser PWP will contact strategic and financial investors to determine potential interest in the purchase of New Look shares or assets.

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