The aborted £2 billion sale of New Look has prompted its owners to look at refinancing the business in a bid to release cash.
The failed sale reflects the City's lack of appetite for the fashion sector, commentators said this week.
One City source told Drapers: "The UK fashion sector is growing at just 2% to 3% at the moment, which is not attractive enough for a private equity company. When buying from within the sector, private equity companies would only be aiming to grab market share, but that's not sustainable. They would need to invest heavily over the long term to realise a return and this is not the private equity norm."
New Look considered an IPO in March, but chose to put the business up for sale after witnessing the turbulent performance of Sports Direct and Debenhams on the Stock Exchange.
New Look's private equity owners Permira and Apax, which together own 60%, along with the retailer's senior management team, have now decided to terminate the sale after bids failed to reach the reserve price of £1.8 billion this week.
A source close to the business said the auction was pulled after several factors caused potential buyers to lose their nerve. "Some of the bidders were American, so viability of the US credit market was a problem. The interest rate environment hasn't helped, along with slow consumer spending."
Seymour Pierce analyst Richard Ratner added that although New Look had a strong management team, the current retail environment was not conducive to a sale. "It's indicative of fashion sector sales generally going pear-shaped," he said. "The weather is awful and as a result of current trading going against the high street, the timing wasn't right and the price too ambitious."
A New Look spokesman confirmed the sale process had been aborted.
- Peacocks chief executive Richard Kirk is gearing up to refinance the value retailer. He told Drapers the business was performing well, so refinancing would be his "favourite" option.
The group was taken private just over a year ago in a £410 million MBO led by Kirk.
He said: "We incurred expensive debt after the buyout and want to swap it for less expensive debt." He refused to speculate on Peacocks' rumoured £800m price tag, but expected a decision to be made in the next few months.