New Look has announced a restructuring program that will cut debt by £1 billion.
The debt will be reduced from £1.35 billion down to £0.35 billion through a debt-for-equity swap proposal.
The retailer, which is owned by Brait, also plans to raise £150 million by issuing new bonds.
“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,” said Alistair McGeorge, the executive chairman.
“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.”
“Therefore, today marks an important milestone for the business, our colleagues, our suppliers and all our other stakeholders. A materially delevered balance sheet and a more flexible capital structure will allow us to better navigate the challenging market environment and create a stable operating platform so that we can achieve further progress against our turnaround plans.”
“Upon completion of the restructuring, our focus will be to enhance profitability by continuing to provide fantastic product for our customers, building brand equity and grasping new market opportunities,” he added.
New Look is closing 85 stores in the UK this year, whilst it is also negotiating the future of a further 13 stores with landlords.
Shares in the South African investment firm Brait (JSE: BAT) are currently trading down by 6.22% (0946GMT).