New Look is being circled by ‘vulture funds’ as pressure builds on the fashion retailer to pay off its £680m Payment in Kind (PIK) debts.

Funds that buy up distressed debt, and capatalise on slow trading conditions, are reportedly snapping up portions of New Look’s debt as the fast-fashion retailer is set to announce a 10-15% sales drop, according to the Sunday Telegraph.

New Look, which is owned by private equity firms Apax and Permira, has stacked up about £680m in high interest PIK debt.

The retailer has reported poor trading conditions this year with like-for-like sales falling 7.1% for the year ending March 26.

To combat the sales downturn New Look brought in former Matalan boss Alistair McGeorge and the company’s founder, Tom Singh, who still owns 22% of the retailer, as commercial director.

Their strategy involves returning to the affordable fast fashion New Look was previously known for.

The company’s net debt was £1.07bn in March which included senior debt of more than £400m. The newspaper reported that New Look financial data shows that £37.8m of the debt is due in July 2012.