Brait participates in New Look recapitalisation
Brait will forgo some of the debt held in its problem child, fashion retailer New Look, in exchange for non-voting shares as it looks to find a new owner.
Brait, along with New Look’s other shareholders, has agreed to recapitalise the business through a huge debt-for-equity swap that will reduce the UK high street fashion retailers’ senior debt from about £550m (R12.5bn) to £100m.
The recapitalisation will be augmented with a reduction in rental costs as the company looks to reduce expenses and focus on its online strategy.
At the same time, shareholders will inject an additional £40m of new capital to give the struggling retailer, which has inflicted severe damage on Brait shareholders, the space and time to deliver on its three-year turnaround strategy.
TURNAROUND
Brait says the turnaround is progressing well in certain respects. “During the closure of stores and government enforced lockdown, New Look focused on enhancing its e-commerce channels and online trading was strong. Sales outperformed the prior year driven by increased conversion rates and units per transaction,” Brait said.
But given that the group decided to close all stores in the
UK during the lockdown, New Look expects revenue for the quarter ending June to be “significantly lower” than 2019.
Since reopening, store sales are 38% lower on a like-forlike basis, underpinning the need to hasten the retailers’ online strategy.
Brait’s interest in New Look was reduced 2019 to 19% and wrote off the entire value of the business on its books. New Look has also initiated a process to find a buyer for the shares or assets of the company.
Brait’s other investment is an effective 79% in Virgin Active. Brait’s share price gained 4.13% to close at R2.52. The company has a market cap of R3.4bn.