UK fashion retail chain New Look, founded by Indian-origin entrepreneur Tom Singh, now depends on around 300 landlords to save its 496 branches and more than 11,000 staff.
On Tuesday (15), the landlords will vote on a controversial so-called company voluntary arrangement (CVA) – the firm’s second in two years – to allow it to pay cheaper or zero rent on its shops.
According to the arrangement, 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.
Reports said that 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.
Besides, the CVA needs to be approved by three-quarters of its creditors, including lenders and suppliers.
It is crucial for the firm as online retailer Boohoo is ready to pounce on New Look if it fails to fetch a deal.
Singh founded New Look in 1969, in Taunton, Somerset, starting with a loan from his parents of £5000.
New Look went through an extensive restructuring process over the past two years, which led to store closures and 980 job losses. A debt-for-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 90 per cent stake in the fashion retailer and it subsequently wrote off the entire value of the investment in 2017.
Last week, financial advisers at Perella Weinberg failed to find a buyer for New Look as part of a separate process to save the company.
New Look’s main banks have agreed to extend two loans worth £170m to 2023 and 2024 respectively. But it 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.
According to reports, some lenders will inject £40m more into the firm.