Struggling British fashion retailer New Look has agreed a restructuring with debtholders to cut its debt by £1bn (€1.1bn) as it seeks to position the group for a return to profitability.
Last March New Look, which is owned by South African investment firm Brait, staved off a potential collapse into administration when British creditors and landlords backed a plan enabling it to close 60 UK stores.
It said, yesterday, it had secured agreement for a debt-for-equity swap proposal to reduce its long-term debt from £1.35bn to £350m together with a new capital raise of £150m funded by the issuance of new bonds.
“[This] agreement represents a critical step in our turnaround plans and lays the foundations to secure the future and long-term profitability of New Look by materially deleveraging our balance sheet and providing us with the financial flexibility to better attack our future,” said executive chairman Alistair McGeorge.
He said that a delevered balance sheet and a more flexible capital structure would allow New Look to better navigate the tough retail environment.
New Look said that UK like-for-like sales fell 2.3% in its second quarter but were up 0.9% in the third.
It forecast earnings before interest, tax, depreciation and amortisation for its 2019 financial year of £84m from its core UK business and a loss of £27m for the non-core business.
Brait’s shares plunged more than 21% on the back of the debt deal announcement.
The agreement will see Brait’s stake in New Look fall from around 90% to between 18% and 30%.
New Look operates 28 stores in Ireland and 25 in the North.
Earlier this month the retailer confirmed the closure of one of its central Belfast stores, with the loss of 70 jobs.
New Look opened its first store in 1969 and expanded to have almost 600 in the UK and 300 in Europe, Asia and China, before being hit by a tough trading environment and growing competition from online shopping.
Brait paid £1.9bn to buy New Look from private equity firms in 2015, but it has struggled to keep up with fast-growing online rivals like Asos and Boohoo.
Reuters and Irish Examiner