New Look wins 'watershed' deal on rents

Fashion retailer New Look has secured landlords' approval for a controversial restructuring that could save thousands of jobs — but has caused deep unease in the property industry.

The company had asked its landlords to agree to rents based on shop turnover in order to better align store costs with trading conditions.

It had also warned repeatedly that it would go bust if the controversial insolvency process, known as a company voluntary arrangement, was not approved. A separate financial restructuring, involving heavy losses for the company's bondholders, was contingent on landlords agreeing to rent cuts.

Chief executive Nigel Oddy thanked landlords and creditors for supporting the restructuring and stressed that physical stores had "a significant part to play in the overall retail market and our omnichannel strategy".

But British Property Federation chief executive Melanie Leech said the insolvency process "is wrongfully being used as a weapon by businesses to rip up leases permanently".

"Property owners find their interests again wholly undermined by a flawed process which forces them to accept a prejudicial outcome for their investors," she added. "This misuse of CVAs must stop."

Several big property groups, including British Land and Land Securities, are believed to have voted against the proposals.

At least three-quarters of unsecured creditors, mostly landlords, need to approve a CVA before it can become effective.

New Look said it could not yet reveal exactly how many had assented, but did say it had secured a majority of landlords as well as more than 75 per cent of overall creditors.

Katherine Campbell, head of real estate disputes at law firm Reed Smith, said the proposal was "unprecedented".

"The sector has never seen anything like this. This is a watershed moment and could set a powerful precedent," she added.

As lockdown began in the UK, New Look's sales fell 32 per cent in March, and they are down 38 per cent since stores started to reopen in mid-June.

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    Saturday, September 19, 2020