Landlords approve controversial New Look CVA
Creditors have voted in favour of New Look’s plans for a company voluntary arrangement, after facing opposition from some of its biggest landlords.
The retailer said that it had secured approval from the “requisite majority” (more than 75%) of unsecured creditors.
New Look previously urged its landlords to approve its CVA so that it could secure a £40m capital injection from its owners, through a proposed debt-for-equity swap.
Creditors have voted in favour of New Look’s plans for a company voluntary arrangement, after facing opposition from some of its biggest landlords.
The retailer said that it had secured approval from the “requisite majority” (more than 75%) of unsecured creditors.
New Look previously urged its landlords to approve its CVA so that it could secure a £40m capital injection from its owners, through a proposed debt-for-equity swap.
Nigel Oddy, chief executive, said: “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.
“We still fundamentally believe the physical store has a significant part to play in the overall retail market and our omnichannel strategy. We look forward to working closely with our landlords and all creditors to ensure we can navigate the uncertain times ahead together.”
Daniel Butters, CVA supervisor at Deloitte, said: “The approval of the CVA is an important milestone in New Look’s restructuring, enabling the business to move forward.”
British Land, NewRiver REIT, Hammerson and Landsec were reportedly among the landlords planning to reject the CVA, which involves switching leases to a turnover rent model.
Under its CVA proposals, the retailer will reduce rents at 402 stores to between 2% and 12% of turnover, while retaining 68 stores for nil rent.
Minimum rents for the rebased stores in the second year will equal 85% of rent paid in the first year, while minimum rents in the third year will be equivalent to 85% of rent paid in the second year. When the CVA concludes after three years, the rebased store rents will reset to the higher of CVA turnover rent or market rent.
The proposal also included “enhanced landlord breaks for all stores”. The company will in turn have no additional rights to exit the rebased stores until the end of the CVA, and will only be able to exit if the store is underperforming.
There are no proposed changes to service charges for the rebased stores, and the CVA includes the full settlement of service charge arrears across all store categories.
Melanie Leech, chief executive of the British Property Federation, has criticised the use of CVAs as a means of “permanently ripping up leases”.
Leech said the “misuse of CVAs must stop”, adding: “Property owners find their interests … wholly undermined by a flawed process which forces them to accept a prejudicial outcome for their investors, including the millions of people whose savings and pensions are invested in commercial property.”
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