Fashion retailer New Look has told the High Court some landlords of its stores want the firm to take a "gamble" that could result in the eventual winding-up of its Irish arm, with the loss of 475 jobs.
Kelley Smith BL, for the company, argued examinership was its “only means of survival” amid ongoing financial losses due to the Covid-19 pandemic.
Ms Smith said landlords opposing examinership instead wanted the company to “keep going” until it reached the “precipice”.
Having heard closing arguments on Wednesday, Mr Justice Denis McDonald reserved judgment on whether to confirm the appointment of an examiner to New Look Retailers (Ireland) Limited, which operates 27 shops.
An interim examiner will remain in place until the case comes back before the court in two weeks.
At a continued hearing on Wednesday, Ms Smith responded to submissions by Rossa Fanning SC, for the three opposing landlords of four stores in Liffey Valley, Dublin; Navan, Co Meath; Mullingar, Co Westmeath; and Ballincollig, Co Cork.
She said sales were declining, with an independent analysis showing a drop of 49 per cent on last year.
Loss-making
The company had been trading at a loss since the beginning of the pandemic and all indications were that it would continue to do so “for the foreseeable future”, she said. The company was in a loss-making position in 2018, made a “small profit” in 2019 and had now returned to loss.
A projected post-examinership cash figure of about €11.2 million did not take into account liabilities such as rent arrears, she said.
An independent expert predicted both cash flow and balance sheet insolvency by March 2021.
Ms Smith said that if New Look got to March and continued paying debts, eventually the company would be looking at liquidation, the loss of 475 jobs and the depletion of whatever dividend remained.
Mr Fanning had said the company’s evidence was “speculative”, but Ms Smith said, with the pandemic, it was an “unprecedented retail environment” and there had to be some looking forward.
With significantly reduced income, the company was bound into long-term leases on premises that were above market rents and “over-rented”, at an estimated €4.5 million per annum, she said.
If an examiner were to be appointed, the repudiation of leases would become possible, she said. The opposing landlords “feared” market rent and wanted the company to “gamble” and “just keep going”.
High penalty
The penalty is “a high one” if the gamble “doesn’t pay off” – it could end up in the winding-up of the company and loss of jobs, she said.
On Monday, New Look was allowed to pay a €2.7 million Revenue bill so it could get tax clearance to apply for the employment wage subsidy scheme for workers.
“Even with the benefit of the [scheme], insolvency is on the horizon and the only means of ensuring survival is for the court to grant protection in the form of examinership,” Ms Smith said.
Mr Justice McDonald proposed to continue with the interim examiner, Ken Fennell of Deloitte, and adjourned the case to October 14th, when he hopes to deliver judgment.
Earlier, Mr Fanning said the application for examinership was “not about saving jobs” but an attempt to rewrite the company’s contracts with landlords owed “substantial arrears”.
The company’s insolvency was “contrived” and it was seeking to make changes that could save it around €5 million per year in rent reductions, he argued.
