NEW LOOK has taken action to cut its debts by handing the company over to its creditors.

The high street retailer, which has a store in the Broadway shopping centre in Bradford, has struck a deal to cuts its £1.35 billion debt pile by 80% to £350 million.

A £150m cash injection will be raised by issuing new bonds. The extra money will provide the company with additional financial resources to support the development of the business.

Last year the retailer announced plans to shut at least 85 stores nationwide as part of a company voluntary arrangement.

Alistair McGeorge, executive chairman, said: “Today’s agreement represents a critical step in our turnaround plans and lays the foundations to secure the future and long-term profitability of New Look by materially deleveraging our balance sheet and providing us with the financial flexibility to better attack our future.

“Over the past year we have made significant progress with our wider turnaround plans to rebuild our position in the UK womenswear market and recover the broad appeal of our product whilst implementing significant cost savings and efficiencies.

“However, it has been clear for some time that the Group’s existing level of indebtedness has been constraining our ability to accelerate our turnaround plans and would continue to limit our growth in the future.

“Therefore, today marks an important milestone for the business, our colleagues, our suppliers and all our other stakeholders. A materially delevered balance sheet and a more flexible capital structure will allow us to better navigate the challenging market environment and create a stable operating platform so that we can achieve further progress against our turnaround plans.

“Upon completion of the restructuring, our focus will be to enhance profitability by continuing to provide fantastic product for our customers, building brand equity and grasping new market opportunities.”

Martin Lane, managing editor of money.co.uk, said: "It’s no secret, New Look has been struggling for a while and all eyes are on the clothing retailer in the current economic climate. With expensive shop floor rents eating through their profits, they simply couldn’t justify having as many physical shops on the high street. Unfortunately, the numerous closures last year have hit their sales hard.

"This is undoubtedly distressing news for New Look employees and their families, especially because their fates with the business are currently uncertain. Now is the time to check your redundancy rights and dig out any income or mortgage protection policies you hold just in case.

"Inflation, lack of rises in wages and shoppers demanding bargains has resulted in the perfect storm - high streets up and down the country are turning into ghost towns. Retailers who only trade online are always going to win without the extra staffing costs of expensive stores to upkeep."