New Look has agreed a deal with its creditors to secure an additional £40m of funding to help ride out the covid-19 pandemic.
Under the terms, New Look said it will have funding to provide a sustainable platform for post-Covid trading and enable the group to invest in, and deliver, its strategic business plan.
However, it also revealed that the transaction involves a number of inter-conditional components, including:
A re-basing of the group‘s UK leasehold obligations through a CVA of New Look Retailers Limited, the group’s primary UK trading entity
A debt for equity swap on New Look’s current debt, reducing senior debt from c. £550m to c.£100m, and “significantly decreasing” interest costs
An extension of primary working capital facilities, which provide further financial support to the Group with no near-term maturities
New Look CEO Nigel Oddy said the additional funding comes after the company’s position has been “significantly impacted” by Covid-19, which has led to a number of “tough but necessary decisions and actions”.
He said: “I am pleased that we have now safely reopened 459 stores. However, current trading remains impacted by the decline in footfall seen right across the retail market, and with the pandemic ongoing and social distancing measures in place for the foreseeable future, it remains difficult to accurately forecast the sales recovery rate.
“Given this, and the extent of our deferred obligations, future expected costs and the likely permanent structural shift in customer spend and behaviour from physical retail to online, we are seeking additional capital for the business and a recapitalisation of our balance sheet to ensure we are as well positioned as we can be going forward in the post-Covid-19 retail operating environment.”
He added: “Additionally, 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.
“We are pleased to have already gained backing from our banks and bondholders for our recapitalisation, and we are grateful for their support and the concessions they have made over recent times. 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.”
He concluded: “We are confident in our plans to build on these strong foundations with our revitalised broad appeal product ranges, and this transaction will allow us to secure our future for the benefit of all stakeholders as we navigate the post-Covid-19 landscape.”