New Look CVA proposal fails to meet best practices standards, says BPF

The CVA proposal launched by New Look this week which aims to switch the majority of its store estate over to turnaround-based rent does not meet best practices standards, The British Property Federation (BPF) has warned.

Under New Look’s CVA proposal, outlined on Wednesday, 402 of its stores would be switched to a turnover percentage of up to 12 percent while the remaining 68 stores would move to zero rent.

But BPF chief executive Melanie Leech said that while the CVA proposal claims to reflect the views of the BPF, it in fact “fails to meet our best practice standards for CVAs and contains terms that property owners will object to”.

“CVAs should not be about permanently ripping up leases - they are supposed to be a temporary measure, as part of a wider rescue plan, to get a business back onto its feet,” Leech said in a statement. “Property owners absorb significant losses during a CVA to support a business’ future, and in return expect the support measures within a CVA to come to an end upon termination of the CVA.

’CVAs must not unfairly compromise property owners’

“New Look is using this CVA to permanently re-write its leases, this proposal is not about a time-limited rescue plan. Property owners are increasingly supporting turnover-based rent models underpinned by collaboration and transparency, but CVAs should not become a mechanism to enforce this.

“We understand the challenges facing the retail, hospitality and leisure businesses on our high streets, which are at the sharp end of the Covid-19 pandemic. CVAs, however, must not unfairly compromise property owners, who need to consider the impact on their investors, including the millions of people whose savings and pensions are invested in commercial property.”

New Look’s CVA proposal will be voted on at a creditor meeting on 15 September. It must receive at least 75 percent of votes in favour to go ahead.

Photo credit: New Look, FashionUnited