New Look launches CVA following new financing

New Look chief executive Nigel Oddy said the CVA was being proposed “out of absolute necessity” and the Covid-19 pandemic “has changed the retail environment beyond recognition”.

The retailer wants to switch to turnover-based rents of up to 12% for 402 of its stores, and to move the remaining 68 to nil rent.

In return, landlords are being offered improved break terms, “providing landlords with the opportunity to exit the lease if they believe they can identify an alternative tenant on improved terms”.

New Look said it will “have no additional rights to exit the rebased stores until the end of the CVA (after 36 months), and even then only in the event that the store is underperforming”.

Oddy said: “We are launching this CVA out of absolute necessity and are calling on our landlords to agree a turnover-based 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.  

“Covid-19 has changed the retail environment beyond recognition, accelerating the permanent structural shift in customer spend and behaviour from physical retail to online, which we have seen in recent trading.

“Despite this, we still fundamentally believe the physical store has a significant part to play in the overall retail market and our omnichannel strategy. We remain committed to the high street and serving our customers through our portfolio of local, conveniently located stores in towns across the UK.

 “However, the magnitude and speed of the shift in consumer behaviour and confidence nationwide require a change in the way leases are structured in order to manage uncertainty so that stakeholders share both risk and upside and to ensure continued business viability.

“We have been in discussions with our landlords regarding a required move to turnover-based rents since May. They have given us valuable and constructive feedback and our CVA proposal recognises this in a number of material changes we have made since our initial proposal. 

“The proposal we have launched today would relieve the financial pressure on New Look as we navigate the post-Covid landscape, while also providing our landlords with greater flexibility over their rental arrangements and ensuring closer alignment of interests with regards to sales recovery.

“Together, the proposed CVA and the financial recapitalisation will provide the foundations for us to deliver our long-term strategic plans, safeguard over 11,200 jobs and continue to build on the brand status New Look has built over the past 50 years as one of the UK’s leading womenswear retailers.”

The CVA will be voted on at a meeting on September 15. Approval requires a vote in favour by at least 75% of unsecured creditor votes.