New Look mulls pre-pack administration in bid for turnover-based rents

Multiple sources have confirmed to Retail Week that New Look has hired consultancy CBRE in a bid to move its 500-strong store estate across to turnover-based rents and there remains the possibility of its falling into a pre-pack administration should those discussions not be successful.

If New Look launched a pre-pack administration, it would be the retailer’s second financial restructuring in less than two years, following a debt-for-equity swap with stakeholders in January 2019.

Retail Week understands that talks between New Look and landlords have been underway for much of the month, but the retailer is becoming increasingly concerned that some landlords will block moves to turnover-based rents.

While a senior property consultant and a landlord both described the pre-pack as a “threat to get focus from landlords”, another source said the restructuring could be needed as the retailer is struggling with debt.

A spokeswoman for the retailer confirmed that a pre-pack administration was one of the options the retailer was discussing, but said it was “the last thing New Look wants”. 

In a statement, New Look said: “We are committed to seeking a consensual agreement with landlords to move to turnover rents, and to work in partnership with them as we continue to navigate these incredibly challenging and uncertain times together.”

Turnover-based rents link occupancy bills to individual stores’ sales and have become a staple in discussions between landlords and high street businesses since the coronavirus crisis began. The likes of Pret A Manger, Frasers Group and Theo Paphitis Retail Group have all been looking to move rents over to turnovers in the last few weeks.

The pandemic has had a chilling effect on high street retail in the UK, with the likes of Debenhams, Cath Kidston and Laura Ashley appointing administrators. So too has institutional landlord Intu, which collapsed into administration on Friday following protracted discussions with its lenders.

A number of high profile retailers, such as JD Sports, Boots and Arcadia, refused to pay March quarterly rent and also withheld its most recent quarter in June.

New Look moved onto monthly rents across much of its portfolio at its last restructuring, but did ask for rent holidays on many of its stores. Where stores are open and trading post-lockdown, Retail Week understands New Look have succeeded in moving those onto turnover based rents. Service charges have also been paid in full from the date when the store reopened. 

The retailer employs 12,000 people across its UK and Ireland business.