LONDON (Reuters) - Creditors of New Look approved the struggling British fashion retailer’s latest restructuring plan at a meeting on Tuesday, safeguarding its immediate future and that of its 11,000 workers.
The company voluntary arrangement (CVA) plan, New Look’s second in three years, involved landlords agreeing new turnover-based leases at 402 stores to help get the retailer through the coronavirus crisis.
At the meeting the CVA was approved by the requisite majority of New Look’s unsecured creditors, it said in a statement.
Last week New Looked warned it would be forced to consider “less favourable alternatives” if creditors did not support its plan. Analysts saw the most likely alternatives as administration or liquidation.
Last month the retailer agreed with its banks and bondholders a recapitalisation, including a debt for equity swap, that would reduce senior debt from about 550 million pounds to about 100 million pounds and inject new capital.
However, the recapitalisation depended on the CVA being approved.
The proposed recapitalisation followed one in January 2019, which left New Look's main shareholders as South African investment firm Brait BATJ.J, along with Alcentra, Avenue Capital and CQS.
“I would like to take this opportunity to thank our landlords and creditors for their support for our CVA, which, alongside the consequential financial restructuring that will now be progressed, will provide us with enhanced financial strength and flexibility, and a sustainable platform for future trading and investment,” said New Look CEO Nigel Oddy.
But the CVA’s approval drew an angry reaction from the British Property Federation, which believes the process is flawed.
“Today’s result clearly demonstrates how the (CVA) process is now wrongfully being used as a weapon by businesses to rip up leases permanently,” said its CEO Melanie Leech.
“This mis-use of CVAs must stop.”
Reporting by James Davey; editing by Kate Holton and Emelia Sithole-Matarise
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