New Look Group Plc, a U.K. fashion retailer, is in talks with investors about replacing a portion of its debt that’s doubled in size since 2006, according to two people with knowledge of the transaction.
The company is seeking to repay so-called payment-in-kind debt with further PIK facilities, said the people, who asked not to be identified because the talks are private. It may repay about half of the facility with new borrowing as well as cash, one of the people said.
The facility, where borrowers can pay interest with more debt, totaled 717 million pounds ($1.1 billion) in March 2012, up from 359 million pounds when first offered to investors, according to a statement on its website. The company’s interest cost rose to 104 million pounds in the year ending March 2012 including a 7 million-pound increase in the cost of the PIK debt, it said in its annual report.
The PIK debt is held by hedge funds including Anchorage Capital Group LLC and Canyon Partners LLC, and credit manager Oak Hill Advisors LP as well as other investors, the people said.
The company, owned by Apax Partners LLP and Permira Holdings Ltd., last year received approval to extend the maturity of senior loans in exchange for higher interest rates on the debt, people said at the time. Its net debt is about 1.1 billion pounds, according to data compiled by Bloomberg.
A spokeswoman for New Look, who asked not to be identified citing company policy, declined to comment on the financing. Officials at Apax, Permira and Anchorage also declined to comment, while Canyon and Oak Hill didn’t respond to telephone calls seeking comment.
New Look operates about 1,100 stores and reported revenue of 1.4 billion pounds in 2012.