New Look has warned it could collapse if landlords do not agree to a controversial restructuring deal to allow it to pay cheaper rents.
The retailer sounded the alarm after 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.
The chain’s future is contingent on landlords approving a so-called company voluntary arrangement (CVA) to pay rent on its 496 shops based on revenues for each site.
If the process is successful, it will safeguard 12,000 jobs and help New Look wipe out £440m of debt. Otherwise it will have to consider “less favourable alternatives”, it said.
Its fate will be decided on Sept 15, two years after it went ahead with another CVA. At the time, it won the approval of almost all creditors and landlords but was forced to make 980 jobs redundant.
This time around some creditors are less supportive. Several of its largest institutional landlords and shopping centre operators are on the fence about whether to back the proposals or not.
New Look has been criticised by the British Property Federation (BPF) over inaccuracies.
“New Look and Deloitte have launched this CVA with reference in their communications that the BPF’s views are reflected in the proposal – this is not true,” chief executive Melanie Leech said.
The fashion brand’s lenders are prepared to inject a further £40m into the business to turn its fortunes around if landlords are supportive.
Chief executive Nigel Oddy, who used to run House of Fraser, has blamed the sales hit from the pandemic. Its stores had to shut for almost three months.
The chain had been struggling for years, although there were green shoots of recovery before coronavirus.
Existing debt, coupled with future costs and an accelerated shift from bricks-and-mortar to online, has forced it to seek a deal with lenders.