New Look’s bondholders have drafted in expert restructuring lawyers to represent their interests amid growing concerns that the struggling fashion retailer will be forced into a costly financial overhaul.
The company is understood to have held a round of meetings last week to sound out lenders as it prepares to shake up its store estate.
Management wants to cut rental costs by shutting around 60 of a total of 600 UK stores in a company voluntary arrangement. The scheme would need approval from 75 pc of New Look’s creditors, including bondholders.
It is understood some of Wall Street’s most aggressive private equity and hedge funds have formed a powerful committee, advised by law firm Sidley Austin, to protect their interests amid concerns that a broader financial restructuring is likely.
The group includes Carlyle, Blackstone’s credit division GSO, asset managers CQS and M&G Investments, investment firm Alcentra and distressed debt investor Avenue Capital Group.
They have recently held a beauty parade of advisers from Lazard, PJT and Rothschild to advise them on options including the possibility of converting their debt into equity.
The value of New Look’s bonds has more than halved in the past year as the retailer has been pummelled by soaring costs and a slump in sales. As a result, a number of hedge funds have started buying into the debt.
One bondholder said that “it was a question of when, not if, New Look will have to do a restructuring”. Another added that it was a “fast-moving situation” and the outcome was not clear.
Brait, New Look’s South African owner, has been taking advice from Deloitte and property agents CBRE, but no formal appointments have been made because it is waiting to see if it has the confidence of its bondholders and landlords before pressing ahead.
It is understood Alistair McGeorge, who served as New Look’s executive chairman between 2011 and 2013, and has been brought back to lead its revival, is unwilling to consider a scenario that could see bondholders seize control.
City sources have said that, while the retailer’s £200m of cash gives the company enough breathing space in the short term, New Look’s sharp earnings fall is making its debt load untenable.
In December, credit rating agency Moody’s downgraded New Look to Caa2 from Caa1 on the basis that it did not expect a swift turnaround in its sales performance.
In November, the retailer revealed it had swung to a loss of £10.4m after its sales tumbled 8.5pc on the back of dismal trading. Another heavy slump in sales is expected when it posts its latest quarterly update on Feb 6.