New Look has been forced to overhaul its finances to secure a £40m cash injection from lenders to stay afloat.
The ailing fashion retailer will trigger a company voluntary arrangement (CVA), its second in two years, to shake up the way it pays rent. It wants to switch most of its 496 stores to paying rent based on revenues for each site.
If landlords vote against the proposal in significant numbers it could torpedo the refinancing deal and put some of its 12,000 jobs at risk. The CVA will be launched on August 26.
Separately, high street rival River Island said it was poised to cut 350 roles at senior management level in stores. The move comes after just last month it said it would make 250 head office staff redundant.
New Look chief executive Nigel Oddy, who used to run House of Fraser, said coronavirus hit sales after its stores had to shut for almost three months.
He added that its existing debt, coupled with future costs and an accelerated shift from bricks-and-mortar to online has forced it to seek a deal with lenders.
New Look has been struggling for years, although there were green shoots of recovery before the pandemic hit. Its now non-executive chairman Alistair McGeorge was brought back three years ago to revive its fortunes.
The retailer's previous CVA won the approval of almost all creditors and landlords but led to 980 job losses.
Mr Oddy said that turnover-based rents would make costs more manageable and better reflect its performance. A source close to the company said the main goal was to secure cheaper rents, rather than shutting stores.
A proposed debt-for-equity swap is expected to slash New Look’s debt from £550m to £100m.