The High Court has approved a sweeping restructuring plan for TG Jones, the owner of the former WH Smith high street stores, allowing up to 150 shop closures and steep rent reductions on hundreds of remaining outlets, according to BBC News. The plan, backed by owner Modella Capital, aims to save the business from imminent insolvency.
Background of the Deal
Modella Capital purchased the chain last year and rebranded it under the name TG Jones. The business currently operates 451 stores and employs 4,700 workers. The WH Smith travel stores, located in railway stations and airports, were not part of the deal and retained the rights to the historic brand name.
Restructuring Plan Details
The restructuring plan, announced less than a year after the acquisition, includes:
- Closure of up to 150 stores.
- 120 landlords will receive no rent for up to three years.
- Rent cuts on hundreds of other stores ranging from 15% to 75%.
The plan forecasts the business will ultimately operate 302 stores, depending on how many landlords exercise their right to terminate leases rather than accept reduced rents.
Financial Strain and Opposition
The High Court heard that the retailer was on the brink of insolvency, facing a cash shortfall of nearly £8m by the end of the week. Tom Smith KC, representing TG Jones, told the hearing the business is "highly distressed" and "running on fumes at the moment." He added that the business would have run out of cash in April without a £10m loan from Modella and a deferral of liabilities, including a large tax bill from HMRC.
Modella attributed the problems to serious underinvestment by previous owners, which caused long-term sales decline, as well as "challenging retail conditions" and the inability to keep the WH Smith brand name.
The plan faced considerable opposition, led by property owner British Land, which described it as "fundamentally unfair." Modella sweetened the deal with several concessions, convincing British Land to drop its opposition. Many suppliers are also taking significant financial hits.
Court Approval and CEO Response
Mr Justice Hildyard approved the restructuring plan this morning, though he did not explain his reasons in court, stating a summary of his judgment would be published.
Alex Willson, TG Jones chief executive, welcomed the court's approval, saying: "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."
Next Steps
Modella said the plan is vital for the survival of the business and will use some cost savings to invest in stores as part of its turnaround strategy. The business now faces the challenge of executing the closures and rent reductions while maintaining operations in the remaining stores.
