New Look hints at potential administration should proposed CVA fail

New Look could be facing the prospect of administration after stating that it will “have to consider less favourable alternatives” if its proposed company voluntary arrangement (CVA) is rejected by its unsecured creditors.

While it has received “overwhelming support” for the financial recapitalisation transaction from its secured financial creditors, the proposal is contingent upon being supported by 75% of the group’s unsecured creditors at a meeting scheduled for 15 September.

This CVA was first outlined last month by the womenswear brand in a bid to substantially restructure its business in light of changing consumer behaviours during the Covid-19 pandemic. Under the proposal, 402 of its stores’ leases would be set at a turnover percentage of up to 12%, while the remaining 68 stores would move to nil rent. New Look said the change to how its leases are structure is necessary due to the “magnitude and speed of consumer behaviour and confidence” during the ongoing Covid-19 pandemic, helping manage uncertainty and “ensure continued business viability”.

In today’s update, the retailer said this transaction would give it the “financial strength, funding and flexibility to allow New Look execute on its strategy and deliver its three-year business plan”. Upon completion, it said benefits will include the material reduction of its long-term debt from £550 million to £100 million of bank facilities, have access to an operating facility of £70 million, and obtain a new cash investment of £40 million to invest in the business.

The group stated: “If the vote is successful, the financial restructuring can be concluded. If unsecured creditors do not support the company’s CVA, the directors of the company will have to consider less favourable alternatives than the current transaction for the group’s stakeholders including its creditors (including those unsecured creditors), customers and employees.”

New Look also revealed it has not received any bids for the purchase of its business or an alternative recapitalisation transaction.

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