The Daily Telegraph - Business

New Look pleads with land­lords to back lat­est res­cue deal to save it from ad­min­is­tra­tion

Boohoo ready to pounce on re­tailer if it fails to win ap­proval for CVA plan, re­ports

- Laura Onita Business · Karen Millen · Osborne Clarke · Avenue Capital Group · Primark Stores Limited · House of Fraser Oxford Street · Christoffel Wiese

It does not bode well for New Look that on­line peer Boohoo is ready to pounce on the ail­ing re­tailer ahead of a crunch vote with land­lords to­mor­row. The move it­self is not sur­pris­ing. Boohoo has been on an ac­qui­si­tion spree of dis­tressed brands over the past year. But it im­plies that New Look will go bust. So far, Boohoo has only bought the name and web­sites of Karen Millen, Coast, Oa­sis and Ware­house af­ter they col­lapsed, and not the stores.

New Look has 496 branches and more than 11,000 staff. Its fu­ture is con­tin­gent on land­lords ap­prov­ing a con­tro­ver­sial com­pany vol­un­tary ar­range­ment (CVA) – its se­cond in two years – to al­low it to pay cheaper or zero rent on its shops.

Last week, fi­nan­cial ad­vis­ers at Perella Wein­berg failed to find a buyer for the whole busi­ness as part of a sep­a­rate process to help steady the ship, dash­ing the firm’s hopes that a white knight could res­cue it. Nigel Boo­bier, a part­ner at law firm Osborne Clarke, says: “The im­pact of not ap­prov­ing the CVA is likely to re­sult in ad­min­is­tra­tion and a sale of the trad­ing name with­out the phys­i­cal sites.”

Around 300 land­lords will now de­cide its fate. Un­der the pro­pos­als, prop­erty own­ers would have to ac­cept no rent for three years on 68 shops and a switch to rent based on rev­enues for 400-odd branches. The CVA re­quires the ap­proval of three quar­ters of its cred­i­tors, in­clud­ing lenders and sup­pli­ers, but votes cast by land­lords weigh the most.

Some prop­erty own­ers have been re­sist­ing the plan fear­ing that it will set a prece­dent in the in­dus­try that will lead to more firms us­ing a CVA to switch to turnover-based rents. The ma­jor­ity of bond­hold­ers, who only last year agreed to cut the chain’s debt by £1bn, mostly racked up un­der pri­vate eq­uity own­ers over the years, are back­ing the pro­pos­als.

An ex­ec­u­tive close to the process said: “No­body wants to go back and do a CVA again. I know the de­bate is about turnover rents, to me that’s not the de­bate … The de­bate is the fi­nan­cial vi­a­bil­ity of many busi­nesses and the fact that most of these prop­er­ties are now not worth any­thing what they were worth. There is a lot of pain be­ing taken by a lot of peo­ple.”

Its main banks have agreed to ex­tend two loans worth £170m to 2023 and 2024 re­spec­tively, although New Look will have to pay more for it, while bond­hold­ers Al­cen­tra, Av­enue Cap­i­tal and CQS will write off £440m of debt if the CVA goes through. Some of its lenders will also in­ject a fur­ther £40m to turn its for­tunes around.

Richard Hy­man, an in­de­pen­dent re­tail an­a­lyst, says: “Just low­er­ing the costs is not ad­dress­ing the core is­sue. What was a re­ally good busi­ness some years ago, now it’s just not good enough. Pri­mark does more or less the same thing, but much bet­ter. It has a cheaper, more fo­cused and more rel­e­vant of­fer. In or­der for New Look to do OK, Pri­mark has to fal­ter.” He adds: “Each time cred­i­tors take a mas­sive hit and noth­ing is done in the time bought. If you are not able to drive rev­enue more strongly, [re­struc­tur­ings] will keep com­ing back un­til there is noth­ing left.”

A source close to the com­pany in­sisted there is “a vi­able busi­ness if this [CVA] goes through”. There were green shoots of re­cov­ery at the chain be­fore coro­n­avirus.

In a let­ter to land­lords, seen by The Daily Tele­graph, chief ex­ec­u­tive Nigel Oddy, who pre­vi­ously ran House of Fraser, pleaded with land­lords.

He wrote: “Our CVA has been launched out of ab­so­lute ne­ces­sity. It is not a sit­u­a­tion we would like to be in, but we have sought to en­sure that our pro­posal of­fers flex­i­bil­ity and fair­ness.”

Since the CVA was launched, New

Look has of­fered sweet­en­ers to land­lords to get the deal over the line, in­clud­ing en­hanced break clauses and an agree­ment to pay pre­set min­i­mum rents for three years.

New Look went through an ex­ten­sive re­struc­tur­ing process over the past two years, which led to store clo­sures and 980 job losses. A debt­for-eq­uity swap wiped out ju­nior debt hold­ers, while Brait, the in­vest­ment firm con­trolled by South African bil­lion­aire Christo Wiese, was left hold­ing less than a fifth of the eq­uity.

Five years ago, Brait paid £780m for a 90pc stake in the fash­ion re­tailer and it sub­se­quently wrote off the en­tire value of the in­vest­ment in 2017.

One ri­val ex­ec­u­tive source said that land­lords’ re­sis­tance to a blan­ket switch to turnover rents by New Look was a non-ar­gu­ment be­cause “a lot of peo­ple al­ready use them”. Prop­erty own­ers have ben­e­fited from fixed rent pay­ments and long con­tracts for too long, the source says. “They can take their stores back if they find bet­ter ten­ants … I would be very doubt­ful.”

‘Not ap­prov­ing the CVA is likely to re­sult in a sale of the trad­ing name, but with­out the shops’

 ??  ?? New Look’s chief ex­ec­u­tive Nigel Oddy, in­set left, has asked land­lords to ap­prove a CVA, which he said was launched ‘out of ab­so­lute ne­ces­sity’
New Look’s chief ex­ec­u­tive Nigel Oddy, in­set left, has asked land­lords to ap­prove a CVA, which he said was launched ‘out of ab­so­lute ne­ces­sity’
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