: New Look Secured Issuer Plc v and : New Look Ltd
| Jurisdiction | England & Wales |
| Judge | Mr Justice Marcus Smith |
| Judgment Date | 02 April 2019 |
| Neutral Citation | [2019] EWHC 960 (Ch) |
| Docket Number | Claim Nos: CR-2019-002172 |
| Court | Chancery Division |
| Date | 02 April 2019 |
[2019] EWHC 960 (Ch)
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
CHANCERY DIVISION
COMPANIES COURT
Rolls Building
7 Rolls Building
Fetter Lane
London EC4A 1NL
THE HONOURABLE Mr Justice Marcus Smith
Claim Nos: CR-2019-002172
CR-2019-002173
Mr William Trower, QC and Ms Charlotte Cooke (instructed by Linklaters LLP) for the Applicants
Hearing date: 2 April 2019
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version may be treated as authentic.
A. INTRODUCTION
. I have before me applications by New Look Secured Issuer plc (the “Secured Issuer”) and New Look Ltd (“NLL”) – together the “Scheme Companies” – for orders pursuant to section 896 of the Companies Act 2006 (the “2006 Act”) convening meetings of creditors for the purposes of considering and, if thought fit, approving proposed schemes of arrangement in respect of each of the Scheme Companies. I shall refer to the schemes collectives as the “Schemes” and individuals as the “Senior Secured Scheme” and the “Parallel RCF Scheme”.
. The Schemes are complex and the description of them in this ruling draws heavily on the very helpful written submissions provided to me by Mr Trower, QC and Ms Cooke. I am indebted to them.
B. BACKGROUND
(1) The Group
. The Scheme Companies are subsidiaries of New Look Finance Limited (the “Parent”). The Parent is a wholly owned indirect subsidiary of New Look Retail Group Limited (“NLRGL”). I shall refer to NLRGL, the Parent and the Parent's subsidiaries (including the Scheme Companies) as the “Group”.
. The Group was founded in 1969 and has developed into a leading fast fashion retailer operating in the value segment of the clothing and footwear market. It operates a multichannel model which, as of 22 December 2018, comprised:
(1) 542 New Look-branded stores, including 536 directly operated stores in the UK and the Republic of Ireland and 6 franchise stores in North Africa and Asia;
(2) 98 stores across France, Belgium, Poland and China, either closed or to be closed as part of exiting these markets;
(3) The New Look e-commerce platform serving customers in approximately 66 countries across the world; and
(4) The third-party e-commerce platform through which the Group sells its products on websites of key third party e-commerce retailers, including ASOS and Zalanda, which currently serves in aggregate over 240 countries.
(2) The Scheme Companies
. The Secured Issuer is an English public limited company, incorporated on 28 May 2015 for the purposes of refinancing the activities of the Group. It has not engaged in any activities other than the issuance of notes and has no material assets (other than an intercompany receivable owed to it by its parent in respect of the proceeds of those notes).
. NLL is an English private limited company, incorporated on 5 March 1986. The principal activity of NLL is to act as a holding and head office functions company for the Group. NLL also owns and licenses the Group intellectual property and is now the principal debtor in respect of a revolving credit facility.
(3) The debt structure of the Group
. The Group's principal debts comprise the notes with which the Senior Secured Scheme is concerned, a revolving credit facility with which the Parallel RCF Scheme is concerned, and some junior notes which are not being compromised by the Schemes. The Group also has operating facilities, a bridge facility entered into during the preparation of the restructuring and certain FX hedging arrangements.
. In summary the Group's key obligations comprise:
(1) The “Existing SSNs” issued by the Secured Issuer pursuant to a New York law governed indenture dated 25 June 2015 (the “Existing SSN Indenture”) comprising:
(a) £700,000,000 6.5% fixed rate senior secured notes due 1 July 2022 (the “Fixed Rate Notes”); and
(b) €415,000,000 4.5% floating rate senior secured notes due 1 July 2022 (the “Floating Rate Notes”).
(2) The “RCF”, an English law governed £100,000,000 revolving credit facility agreement dated 25 June 2015 between, amongst others, the Parent, certain lenders (the “RCF Lenders”), Deutsche Bank AG, London Branch as Security Agent and Facility Agent (the “RCF Agent”). By an English law governed accession letter and deed of novation dated 15 March 2019 between NLL and New Look Retailers (“Retailers”), NLL acceded as an additional borrower under the RCF through a transfer of the borrowing obligations of Retailers.
(3) The “Operating Facilities”, comprising £100,000,000 of operating (liquidity, trade and import) facilities, which are utilised to the fullest extent possible, pursuant to:
(a) A trade finance facilities agreement dated 16 March 2018 between, amongst others, Retailers, the Parent and HSBC Bank Plc as Facility Agent and Issuing Bank.
(b) A buyer agreement originally dated 10 February 2010 between, amongst others, Retailers and HSBC Invoice Finance (UK) Limited (the “Operating Facility Lender”).
Together, I shall refer to these as the “Operating Facility Agreements”.
(4) The “Bridge Facility”, an £80,000,000 bridge facility made available to Retailers as principal debtor in order to address by way of interim funding the liquidity challenges that I describe further below. The interim financing was open to participation by all holders of Existing SSNs (subject to certain eligibility requirements) during a subscription period which commenced on 23 January 2019 and ended on 18 February 2019, providing that the participant (amongst other things):
(a) Acceded to the “Lock-Up Agreement” and agreed to support the “Restructuring”. I refer further to both the Lock-Up Agreement and the Restructuring below;
(b) Confirmed its commitment to participate in the Bridge Facility in the appropriate amount; and
(c) Confirmed its commitment to subscribe for its proportionate share of the New Money Bonds as further described below.
On 28 January 2019, the full amount of the Bridge Facility was advanced by the “Backstop Parties”. The Backstop Parties comprise: (i) Brait Capital International Limited (a significant holder of Existing SSNs) (the “Brait Bondholder”); and (ii) the Bondholder Committee (a term defined in the Bridge Facility), there being a syndication to other holders of the Existing SSNs thereafter. At the end of the subscription period, holders of more than 90% of the Existing SSNs had participated in the Bridge Facility. The margin on the Bridge Facility is 12% per annum, and the lenders of the Bridge Facility will also be entitled to receive a fee from the Parent of 5% on all Bridge Facility amounts which are repaid or prepaid. In addition, the Backstop Parties receive a backstop fee in an aggregate amount of 4% of the total issue amount of the “New Money Bonds”, which I describe further below. The Bridge Facility has a termination date of 30 June 2019, unless extended to 30 September 2019 with the consent of the Backstop Parties.
(5) The “SNs”, £200,000,000 8% senior notes due 1 July 2023 issued by New Look Senior Issuer plc (a wholly owned subsidiary of the Parent) (the “Senior Issuer”) under an indenture dated 24 June 2015. £23,281,000 of the SNs have been cancelled, so that as at 24 March 2018, there was £176,719,000 in notional outstanding debt in respect of the SNs.
(6) The “FX Hedging”: Retailers is the counterparty to certain foreign exchange forward transactions under a hedging agreement with an international investment bank pursuant to a long-form confirmation dated 23 January 2019.
(7) “Other Group Indebtedness”: NLL, Retailers and their subsidiaries owe certain upstream loans to members of the Group. The members of the Group to whom these loans are owed will not form part of the “Restructured Group”, a term again considered further below.
. The creditors of the Secured Issuer in respect of the Existing SSNs and the RCF Lenders are together the “Scheme Creditors”.
. As at 11 March 2019, the Group's total indebtedness as described above, save for the Operating Facilities, FX Hedging and the Other Group Indebtedness, comprised as follows:
(4) Security
| Total Principal Outstanding (as at 11 March 2019) | Total Accrued Interest (as at 11 March 2019) | |
| Fixed Rate Notes | £700,000,000 | £14,787,500 |
| Floating Rate Notes | €415,000,000 | €4,513,125 |
| RCF | £100,000,000 | £152,619 |
| Bridge Facility | £72,846,847 €8,114,751 | £1,112,071 €95,269 |
| SNs | £176,719,000 | £4,594,694 |
| Total | £1,049,565,847 €423,114,751 | £20,646,884 €4,608,394 |
. Amounts owed by the Group under the Existing SSNs, the RCF, the Operating Facilities, the FX Hedging and the SNs are secured by an English law governed debenture dated 26 June 2015 between a security agent and the Group companies.
. The rights of the holders of the Existing SSNs, the RCF Lenders and the holders of the SNs and the ranking of the debts and liabilities owed, are regulated by an intercreditor agreement (the “Existing Intercreditor Agreement”), which is governed by English law. The indebtedness ranks in the following order by reference to enforcement proceeds:
(1) First, the RCF, the Operating Facilities, the Bridge Facility and the FX Hedging (which rank pari passu and on a pro rata basis);
(2) Secondly, the Existing SSNs; and
(3) Thirdly, the SNs.
. The RCF Agreement also contains waterfall provisions under the terms of which the RCF ranks ahead of the Bridge Facility.
(5) Financial difficulties
. The Group has experienced a squeeze on liquidity as a result of a range of internal and external factors. Amongst other things, the fashion retail sector in the UK...
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