Steve New: Troubled guitarist with Rich Kids, Glen Matlock's post-Sex Pistols band

Formed by the bassist and songwriter Glen Matlock after he was edged out of the Sex Pistols in February 1977, the new wave band Rich Kids played a potent brand of power pop reminiscent of the Sixties British groups The Who and the Small Faces, and predated the US skinny-tie contingent of The Knack and The Cars.

Their eponymous debut single made the Top 25 in early 1978 and they played a series of memorable live dates around the UK, seeming well on their way. However, neither the atmospheric anti-war song "Marching Men", nor the sublime "Ghosts of Princes in Towers", the title track of their album produced by the former David Bowie guitarist Mick Ronson, charted – and when it was eventually released in October 1978, the album itself stalled at No 51.

They broke up the following year and never fulfilled the potential of a sterling line-up, though the vocalist and second guitarist Midge Ure, formerly of the Scottish teenybop group Slik, and drummer Rusty Egan, went on to great success with Visage. Ure also excelled as a solo artist and as the front man of Ultravox in the New Romantic era.

Their youngest member, the promising lead guitarist Steve New, who has died of cancer, had a brief stint with John Lydon's PiL, and recorded with both Billy Idol's Generation X and Iggy Pop in the late 1970s and early '80s. However, an addiction to heroin hampered his subsequent endeavours.

New wore pink when Rich Kids appeared on Top of the Pops and always had a penchant for women's clothing. "I've been a tranny from day one," he said. "I was completely ashamed of that fact. It was always a secret life. In the bands I was in, it was always rock'n'roll, leather trousers, geezers. You know to me that was always more faggy than anything. There were two battles going on: my battle with drugs, and my own shame battle of being a transvestite. Denial on both levels."

After undergoing drug counselling he came to accept who he really was and re-emerged as Stella Nova, the transvestite composer, musician and producer half of Beastellabeast, a duo he formed with the lyricist, vocalist and artist Beatrice Brown. The pair met when they both worked on the Titanic – Official Movie Tour exhibition at Wembley Arena in 1998. "I guess it's rock music gone mad," he said of the impossible-to-pigeonhole music featured on their Bestiality and Stars and Wronguns albums.

In January this year he reunited with Rich Kids at the Islington Academy in London for a benefit concert which proved to be an emotional occasion and his farewell appearance.

Born in London in 1960, he attended Quintin Kynaston School in St John's Wood. Musically gifted and precocious, he started playing with the London Jazz Orchestra in 1974. But "this flash 15-year-old guitarist who wouldn't get his hair cut", as Matlock described him to the New Musical Express, also loved avant-garde composers like Edgar Varèse, Karlheinz Stockhausen and Frank Zappa, the jazz of Miles Davis and Duke Ellington, the glam-rock of Bowie and T Rex, as well as West Coast American bands such as The Doors and Love. In the mid-'70s he fell in with the emerging London punk scene and, "for about 15 minutes and a few rehearsals", in order to placate drummer Paul Cook, was in the Sex Pistols alongside guitarist Steve Jones.

Matlock certainly remembered New's prowess when he began assembling Rich Kids, and the pair co-wrote much of the new group's catchiest material, in particular the B-side "Empty Words", "Ghosts of Princes in Towers" and the album opener, "Strange One". Sporting a red beret, wearing frilly blouses and playing blistering guitar fills, New proved a great foil to both Matlock and Ure, even if gobbing audiences didn't always know what to make of the band whose repertoire included the Pistols' "Pretty Vacant" and the Small Faces' "Here Comes the Nice" as well as "Put You in the Picture" from Ure's days with PVC2, the short-lived, punked-up Slik.

Rich Kids signed to EMI, the label that had quickly washed its hands of the Sex Pistols after the Bill Grundy furore in December 1976, and appeared poised to spearhead the "new" new wave as Egan put it at the time. Boosted by a limited-edition red vinyl, their bouncy first single lived up to expectations but, despite TV appearances on Revolver and Rock Goes to College, and two John Peel sessions, Rich Kids were soon just a wonderful power-pop memory. Indeed, New recalled their high watermark, a sell-out concert at the Lyceum in London in April 1978, for all the wrong reasons.

"That was such a night," he said. "Ronson played with us, with Ian McLagan [of the Small Faces] on keyboards. Iggy was there, Steve Marriott turned up. There's me stood there in the toilet cubicle, age 17, with all four of them doing lines of coke. I remember just thinking, 'Fucking hell, you're with the crème de la crème here'. I was so young then, I just wanted to get fucked up. I come from a pretty dysfunctional family, so I was heading down that road regardless. Though I must say that I never let the music get away."

After Rich Kids called it a day in early 1979, New backed Sid Vicious and Johnny Thunders and nearly became a junkie casualty like them. Most of his contributions to Iggy Pop's Soldier album in 1980 were discarded after New fell out and fought with David Bowie, who had attempted to seduce the guitarist's then-girlfriend, Patti Palladin, during the recording sessions at Rockfield Studios. New turned down the opportunity to join Duran Duran, and worked with Kim Fowley and on Matlock's solo albums after spending the first half of the 1990s in the US. Back in London, as The New, he made an album entitled Here Comes Everybody for Poptones, Alan McGee's post-Creation label.

Close friends thought New highly intelligent, creative, stylish and, in the words of the Bowie song, "the prettiest star". Paying tribute, Mick Jones, of Clash fame, and once upon a time an ancillary member of Rich Kids, said: "If The Clash had needed a fifth member, it would have been Steve New."

Stephen Charles New (Stella Nova), guitarist, singer, songwriter: born London 16 May 1960; married Wendy (marriage dissolved, one daughter); one son from a subsequent relationship; died London 24 May 2010.