New Look is planning to slash rents by up to 60% under the terms of a potential company voluntary arrangement (CVA) being discussed with landlords.
Retail Week has learned that the embattled fashion retailer is informing landlords of its plans with the aim of formally launching the CVA “in the first or second week of March”.
Doing so would provide enough time for creditors to vote through the CVA before New Look’s next quarterly rent date on March 25.
Details of the proposals, seen by Retail Week, suggest New Look has divided its 600-strong store estate into three categories: A, B and C.
Under New Look’s plans, it would pay landlords 40% of its current rental liability on 70 category C stores. After six months, the rent on those shops would be reduced to zero.
It is thought that both New Look and its landlords would have the right to scrap the retailer’s lease on the category C stores at any time, meaning New Look could swing the axe on all 70 shops, should it wish to do so.
Sources close to the situation described the New Look stores in category C as being in “terminal” condition because of ongoing lacklustre trading.
New Look’s category B stores, of which there are understood to be around 380, would be subject to rent cuts of between 20% and 60% for a three-year period.
Under the proposals, landlords would have 180 days from the launch of the CVA to decide whether or not they want to take back leases and attempt to rent space to another occupier.
Should they opt not to do so, they would be tied into accepting reduced rent from New Look over the full three-year period of the CVA.
New Look’s remaining stores, of which there are around 150, would fall into category A. These shops would continue trading as normal and paying their current levels of rent.
The fashion giant wrote to landlords last week, alerting them that its finance boss Richard Collyer would be seeking meetings to discuss potential store closures and rent reductions.
Yesterday, it emerged that New Look had kicked off separate consultations with its bondholders to request changes to their terms which, if agreed, would pave the way for New Look to launch a CVA.
A New Look spokeswoman said: “The company has previously indicated that a potential CVA is being considered as part of a range of options to improve the operational performance of the business.
“No final decision has been made regarding a CVA, which would require consent from our creditors.”
Deloitte and commercial property agency CBRE, both of which have worked with New Look to draw up the proposals, also declined to comment.