New Look has launched a Company Voluntary Arrangement (CVA) proposal, seeking approval from landlords and unsecured creditors to reset 402 of its UK stores to a turnover rent model.

Leases would be set at a turnover percentage of up to 12 per cent, while the remaining 68 stores in the womenswear retailer's estate would move to nil rent.

Landlords would be provided with more breaks for all stores, giving them the opportunity to exit the lease if they could identify an alternative tenant on improved terms.

New Look said the change is necessary due to the “magnitude and speed of consumer behaviour and confidence” during the Coronavirus crisis, helping manage uncertainty and “ensure continued business viability”.

Chief executive Nigel Oddy explained: “We are launching this CVA out of absolute necessity and are calling on our landlords to agree a turnover rent model for our stores which will put us into a position to be able to complete a financial restructuring agreed with our creditors that will secure the future of New Look and our employees."

He said that the model that aligns future performance and reflects the wider retail market.

“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," commented Oddy. "Despite this, we still fundamentally believe the physical store has a significant part to play in the overall retail market and our omnichannel strategy."

The CVA meeting is scheduled for 15 September and requires at least three quarters of unsecured creditor votes to be in favour for the proposal to pass.

Daniel Butters, partner at Deloitte, which was recently appointed to help put the proposal together, said: “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.”

Earlier this month, New Look secured an agreement with its creditors to extend its current facilities and deliver £40 million of new investment.The move meant it will also be able to significantly de-leverage the balance sheet, with current debt reduced from £550 million to £100 million.

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