We reported in September that New Look's CVA had been approved by creditors, including provision for 400 of its store rents to be linked to turnover - see https://blog.charlesrussellspeechlys.com/post/102gf9i/a-new-look-for-commercial-rents
However, it seems that the controversial CVA is now going to be challenged in the courts by a number of the landlord creditors, including British Land and Land Securities. This will obviously be unwelcome news for the retailer on top of the arrival of a second lockdown, which will inevitably cause further disruption for its business.
Although the New Look CVA allowed landlords some flexibility to terminate the leases where better terms could be achieved with an alternative occupier, the decision to include turnover rent proposals was criticised by the British Property Federation at the time. It is therefore unsurprising that some of the landlord creditors have decided to take action, particularly given the potential implications of the arrangement for the wider market. The decision may also reflect a view that, for landlords of well-performing stores, an administration might lead to a better outcome - given that ongoing rents would then have to be paid as an expense of the administration. However, there would be issues with recovering any existing arrears given the moratorium which applies during an administration.
Whatever the result of this case and New Look's financial difficulties, lenders, landlords and retailers will watch the proceedings unfold with great interest.
New Look landlords have challenged its CVA proposals, placing fresh doubt on the fashion retailer’s chances of survival.