Backers to cash in on New Look boom

PRIVATE equity groups Permira and Apax are poised to cash in on the success of High Street fashion chain New Look by refinancing the business and selling a large part of their shareholding, just 15 months after buying it.

Citigroup and HSBC banks are the front-runners to lead the deal, which could see the private equity giants take out more than £100m.

Permira and Apax backed founder and majority shareholder Tom Singh in his £699m bid to take the company private in February 2004. It is believed that the deal included £300m in equity and £450m in debt, which included paying advisers' fees.

Since then, New Look has invested heavily in its designers and distribution network and bucked the overall gloom on the High Street. It reported sales growth of 17.4% in the six months to September 2004 and 18.8% during the 14 weeks to New Year's Day.

The refinancing follows news that Debenhams, which is also in private hands, has appointed advisers to help it return cash to shareholders. Replacing equity with debt allows private equity groups to cash in their shareholdings, reducing their exposure to risk but without losing ownership of the business.