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Retail: New Look debt swap is a sign of the times

Restructuring shows vulnerability of highly indebted firms as cycle turns.


“A jolt to the market could come from a well-known name in the retail sector facing difficulties. This could lead to a default which could impact the market. There are a large number of credit funds in, for example, New Look. A company like this defaulting would have a big impact. There are handful of names where if they do hit a wall, people are stuck – they can’t get out.” 

When Jeremy Ghose, managing director at Investcorp Credit Management, made this observation to Euromoney in February 2018, the market was still digesting the fallout from the Steinhoff fraud scandal that had engulfed the margin lending business of several large US lenders. 

He spoke as part of a story examining the impact that years of easy corporate credit might have when the cycle turned.

Now, nearly one year later, New Look has announced a debt-for-equity conversion that will result in bondholders holding over 90% of the equity in the company and reduce existing debt from around £1.35 billion to roughly £350 million.

Under the proposal, which was announced on January 14, existing senior secured notes will be exchanged for £250 million of new bonds with a 2024 maturity that pay 8% interest a year.

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