By James Davey and Emma Rumney
LONDON/JOHANNESBURG (Reuters) - Shares in South African investment firm Brait (J:BATJ) plunged more than 20 percent on Monday after its British fashion chain New Look announced a deal with creditors to cut 1 billion pounds off its debts, in its latest turnaround attempt.
The deal, including a debt for equity swap, will see Brait's stake fall from around 90 percent to between 18 and 30 percent.
New Look staved off a potential collapse into administration last March when British creditors and landlords backed a plan enabling it to close 60 UK stores.
However, the firm's debts hindered its attempts to cope with tough trading conditions in Britain, which has just endured its worst Christmas for a decade.
"Today's agreement ... 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," New Look Executive Chairman Alistair McGeorge said in a statement.
The deal will see New Look reduce its long-term debt from 1.35 billion pounds to 350 million pounds, and raise 150 million pounds in capital via the issuance of new bonds.
Ron Kiplin, portfolio manager at Cratos Capital, which does not hold Brait shares but researches the stock, said the restructuring served to show the weakness of Brait's position in terms of both capital and liquidity.
Brait's shares plunged as much as 24 percent to a seven year low of 24.06 rand. That is a far cry from its peak of over 174 rand in late 2015.
New Look opened its first store in 1969 and expanded to have almost 600 in the United Kingdom and 300 across Europe, Asia and China, before being hit by a tough trading environment and growing competition from online shopping.
Brait paid 1.9 billion pounds to buy New Look from private equity firms in 2015, but it has struggled to keep up with fast-growing online rivals like ASOS (L:ASOS) and Boohoo (L:BOOH).
New Look said its total UK like-for-like sales fell 2.3 percent in its second quarter to the end of September, but were up 0.9 percent in its third quarter.
It forecast earnings before interest, tax, depreciation and amortisation for its 2019 financial year of 84 million pounds from its core UK business and a loss of 27 million pounds for the non-core business, including China, France and elsewhere.