- Angela Gonzalez-Rodriguez |
New York - The British fashion retailer has put its ownership in the hands of its lenders after failing to repay its piling debt, currently at the 1.35 billion pounds mark. The deal will see 72 percent of the business secured by New Look’s creditors.
New Look started the week on a positive note: after months’ worth of financial and strategic struggle, the fashion retailer has inked a rescue plan which involves handing the company’s control to lenders in exchange for an eleventh hour salvation.
As explained in a corporate release Monday, New Look is set to reduce its debt by 80 percent to 350 million pounds. The first step towards that is a 150 million pounds capital injection that will come from issuing new bonds.
New Look’s creditors to secure 72 percent of the business
In return its creditors will secure 72 percent of the business, explains SKY News. Meanwhile, the fashion group’s its current owner, South African investment firm Brait, will be left with a significantly reduced holding. Another 5 percent of the business will be held by management, confirmed the company.
Additionally, New Look has committed to reducing its debts’ payments and interests from 80 million pounds to 40 million a year.
Also on its turnaround plans is the closing of its remaining 120 stores in China, in addition to 60 stores in the UK. The latter is part of the compromise New Look acquired last March to avoid falling into administration.
Executive chairman Alistair McGeorge said: "Today's 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,” reported ‘The Telegraph’.
New Look’s boss: “existing level of indebtedness has been constraining our turnaround plans”
McGeorge went on, recalling how "Over the past year we have made significant progress with our wider turnaround plans to rebuild our position in the UK womenswear market and recover the broad appeal of our product whilst implementing significant cost savings and efficiencies. However, it has been clear for some time that the Group's existing level of indebtedness has been constraining our ability to accelerate our turnaround plans and would continue to limit our growth in the future."
Total like-for-like sales at the South African owned company fell 2.3 percent in its second quarter in the UK.
Challenging conditions will remain in the new future for New Look, which now forecasts earnings before interest tax, depreciation and amortisation of 84 million pounds in its 2019 financial year for its UK business. Likewise, the company’s expectation loss-wise is 27 million pounds from its non-core business, which includes its stores in China, France, Belgium and Poland.
Image: New Look, corporate website