New Look is trying to negotiate a deal which would see it pay zero rent on 68 of its stores as part of a restructuring plan designed to safeguard 11,200 jobs.
The high street fashion retailer confirmed earlier this month it was undertaking a company voluntary arrangement (CVA) deal to cut its shop rents and debt pile.
The company said it will field a vote on the CVA on September 15 after securing a £440m debt-for-equity swap.
A debt-for-equity swap is a refinancing deal in which a debt holder gets an equity position in exchange for cancellation of the debt. The swap is generally done to help a struggling company continue to operate.
New Look said it has also secured £40m in new money to provide it will financial stability to support it for post-coronavirus lockdown trading.
It is asking creditors to back a CVA proposal which would see 402 of its stores move onto turnover-based rents, to support the company as high street footfall gradually returns.
Another 68 of its stores will have “nil rents” for the rest of their lease period, it said.
Nigel Oddy, chief executive officer of the retailer, said the move is “of absolute necessity” and will “relieve financial pressure” on the company after being impacted by store closures during the pandemic.
He said: “Covid-19 has changed the retail environment beyond recognition, accelerating the permanent structural shift in customer spend and behaviour from physical retail to online, which we have seen in recent trading.
“Despite this, we still fundamentally believe the physical store has a significant part to play in the overall retail market and our omnichannel strategy.
“However, the magnitude and speed of the shift in consumer behaviour and confidence nationwide requires a change in the way leases are structured in order to manage uncertainty so that stakeholders share both risk and upside, and to ensure continued business viability.”
Daniel Butters, a partner at Deloitte, said: “The retail trading environment in the UK has been under pressure for some time, driven by weaker consumer confidence and competition from online channels.
“Covid-19 has increased these challenges and accelerated the shift in customer spend from physical retail to online.
“The turnover rent model better aligns the risk and reward of trading during these uncertain times and the CVA, together with the wider-balance sheet restructuring, provides a stable platform upon which management’s strategy can be delivered.
“It is important to stress that no stores will close on day one and employees and current suppliers will continue to be paid on time and in full.”