New Look is being circled by ‘vulture funds’, funds that buy up distressed debt, as pressure builds on the retailer to pay off its £680m Payment in Kind (PIK) debts.
The vulture funds, which capitalise on slow trading conditions, are believed to be snapping up portions of its debts as the fast-fashion retailer is set to announce a 10 to 15% drop in trade, according to The Sunday Telegraph.
New Look, which is owned by private equity firms Apax and Permira, has stacked up about £680m in high interest PIK debt. The retailer could not refinance its debt when it pulled out of a £2bn stock market float last year.
The retailer has reported poor trading conditions this year with like-for-like sales falling 7.1% for the year ending March 26. Positive growth is not expected to be reported in the company’s first half trading figures, which will be posted later this year.
To combat the sales downturn, New Look brought in former Matalan boss, Alistair McGeorge and the company’s founder, Tom Singh, who still owns 22% of the retailer, as commercial director. Their strategy involves returning to the affordable fast fashion New Look was previously known for.
The company’s net debt was £1.07bn in March which included senior debt of more than £400m. The newspaper said that New Look financial data shows that £37.8m of the debt is due in July 2012.