Distressed debt investors eye New Look
New Look’s large debt pile is increasingly attractive to distressed debt investors with a report at the weekend that Anchorage Capital and HPS Investment Partners have been trying to buy part of the retailer's £1.2bn debt load.
Buying such debt always carries a large amount of risk but for businesses that the buyers expect to return to health, buying debt at a big discount can deliver very high returns further down the line.
New Look, which was taken over by deep-pocketed South African investment firm Brait capital for around £1.9 billion two years ago, and while Brait may need to inject more cash into the firm, it is still probably one of the more attractive propositions for this kind of investment.
The firm was previously a strong performer in the UK fashion sector and has a good chance of getting back to health at some point, despite the tough retail environment. Its pinning a lot of hopes on its cost-cutting plan and the imminent arrival of its new creative chief Paula Dumont López.
New Look hasn’t commented on the report about its debt (which appeared in the Sunday Times), and neither have either of the investment firms said to be interested.
Earlier this month the retailer reported poor quarterly numbers with adjusted Ebitda down 37.3% to £27.2m, for the 13 weeks ending June 24. It said this was due to the challenges it faced in UK sales and investment in strategic initiatives.
Revenue fell 4.4% to £338.7m with New Look Brand like-for-like sales down 8.2%, UK like-for-like sales down 7.5% and own website sales down 0.6%. Third Party e-commerce sales rose 15.7%, but underlying operating profit fell 60.3% to £12.1m and the loss after tax was £15.2m. CEO Anders Kristiansen said the UK market has remained difficult.
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