Restructuring Plan Approved for TG Jones, Former WHSmith High Street Chain
The owner of TG Jones, the business that acquired WH Smith's former High Street stores, has secured approval for a comprehensive restructuring plan. This plan includes the closure of up to 150 shops and significant rent reductions on the majority of the remaining outlets.
Modella Capital purchased the chain last year, subsequently rebranding the stores under the TG Jones name. Currently, the chain operates 451 stores and employs approximately 4,700 workers.
It is important to note that WH Smith travel stores, located in railway stations and airports, were excluded from this transaction. The original business retained the rights to the historic WH Smith brand name.
Less than a year following the acquisition, Modella announced a major restructuring initiative, attributing the decision to "challenging retail conditions."
The plan entails closing up to 150 stores. Additionally, around 120 landlords will receive no rent payments for up to three years, while hundreds of other stores will benefit from rent reductions ranging from 15% to 75%.
Modella emphasizes that these measures are essential for the survival of the business and intends to reinvest some of the cost savings into the stores as part of a broader turnaround strategy.
Financial Challenges and Court Proceedings
During a High Court hearing this week, it was revealed that the retailer was facing imminent insolvency, with a projected cash shortfall nearing £8 million by the end of the week unless the rescue plan was sanctioned.
Tom Smith KC, representing TG Jones, described the company as "highly distressed" and "running on fumes at the moment."
"The business would have run out of cash in April had it not been for a £10m loan from Modella and a deferral in liabilities including a large tax bill from HMRC."
Modella attributed part of the difficulties to significant underinvestment in the stores by previous owners, noting a long-term decline in sales.
However, the company also cited "challenging retail conditions" and the loss of the WH Smith brand name as factors contributing to current poor trading performance.
Opposition and Concessions
The restructuring plan faced notable opposition, particularly from property owner British Land, which criticized the proposals as "fundamentally unfair."
In response, Modella offered several concessions that ultimately persuaded British Land to withdraw its opposition. Many suppliers are also expected to incur substantial financial losses as a result of the plan.
The restructuring forecasts that the business will retain approximately 302 stores, contingent upon how many landlords choose to terminate leases rather than accept reduced rents.
Judicial Approval and Future Outlook
Mr Justice Hildyard was tasked with determining whether the restructuring was equitable, specifically if creditors would be no worse off under the plan than if the retailer entered administration.
This morning, Mr Justice Hildyard approved Modella's restructuring plan. He did not provide an oral explanation in court but indicated that a summary of his judgment would be published.
Alex Willson, chief executive of TG Jones, expressed optimism following the court's decision.
"This decision allows us to move ahead with our turnaround strategy.
The plan protects the substantial core of the store estate and makes TG Jones a stronger, more sustainable business.
We are incredibly grateful to all the colleagues, partners and stakeholders who engaged constructively throughout the process, and to Modella Capital for its continued financial commitment."
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Up to 150 former WHSmith high street stores to close.
