High street chain New Look, is attempting to secure a three-year rent holiday for its stores as it formally launches a major restructuring plan involving a company voluntary agreement (CVA) to safeguard 11,200 jobs.
In an unusual step, New Look asked landlords to change the way it pays rent, by resetting 402 of its stores to turnover-based rent to align rent payments with future performance.
Meanwhile, under the proposals another 68 of its stores will have “nil rents” for the rest of their lease period.
The turnover percentage will be set at 12% as New Look looks to secure its second financial rescue deal in 18 months.
Earlier this month, the chain confirmed it was undertaking a CVA to reduce its debt pile and cut shop rents.
A CVA is a procedure that allows a company to settle debts by paying only a proportion of the amount that it owes to creditors.
Creditors and landlords are due to vote on the CVA on 15 September, with the struggling high street retailer requiring at least 75% of the votes to approve of the plans.
If the deal does not secure enough votes the chain is at risk of collapsing, risking thousands of jobs.
The retailer also said it secured £40m ($52.5m) in new cash to provide it with financial stability to support it for post-COVID trading and creditors agreed to cut debts by £440m to about £100m in a debt-for-equity swap.
The Centre for Retail Research, which tracks the impact of CVAs, said 313 shops were closed in 2019 using CVAs, costing over 26,000 jobs. It found CVA usage increased by 30% between 2015 and 2019.
New Look chief executive, Nigel Oddy, said the move is “of absolute necessity” and will “relieve financial pressure” on the company after being impacted by store closures during the pandemic.
“COVID-19 has changed the retail environment beyond recognition, accelerating the permanent structural shift in customer spend and behaviour from physical retail to online, which we have seen in recent trading.
“Despite this, we still fundamentally believe the physical store has a significant part to play in the overall retail market and our omnichannel strategy.
“However, the magnitude and speed of the shift in consumer behaviour and confidence nationwide requires a change in the way leases are structured in order to manage uncertainty so that stakeholders share both risk and upside, and to ensure continued business viability,” Oddy said.
Founded in 1969, the fashion retailer has over 800 stores globally, including in Europe, China and the United Arab Emirates with 519 stores in the UK and Republic of Ireland.