Restructuring Plan Approved for TG Jones
Modella Capital, the current owner of TG Jones, formerly WH Smith's High Street division, has received court approval for a comprehensive restructuring initiative. This plan includes the closure of as many as 150 retail locations and substantial rent reductions across a majority of its remaining stores.
Background to the Restructuring
Modella Capital acquired the High Street chain last year, subsequently rebranding the stores as TG Jones. The business currently operates 451 stores and employs approximately 4,700 individuals. It is important to note that WH Smith's travel stores, located in railway stations and airports, were not part of this acquisition, and WH Smith retained its original brand name rights.
Less than a year after the acquisition, Modella announced its radical restructuring proposal, citing "challenging retail conditions" as a primary factor. Beyond the store closures, the plan stipulates that around 120 landlords will forgo rent for up to three years, while rents for hundreds of other stores will be reduced by 15% to 75%.
Modella asserts that these measures are critical for the long-term viability of the business. The company intends to reallocate some of the cost savings into store investments as part of its broader turnaround strategy.
Court Proceedings and Financial Distress
The High Court was informed this week that the retailer was on the verge of insolvency, facing a projected cash deficit of nearly £8 million by the end of the week, unless the rescue package was sanctioned.
Tom Smith KC, representing TG Jones, highlighted during the hearing that the business was in a "highly distressed" state and "running on fumes." He further explained that without a £10 million loan from Modella and a deferral of liabilities, including a significant tax bill from HMRC, the company would have exhausted its cash reserves by April.
Modella attributed some of the company's difficulties to what it described as severe underinvestment by previous owners, which contributed to a long-term decline in sales. The company also pointed to "challenging retail conditions" and its inability to retain the well-known WH Smith brand name as contributing factors to its current poor trading performance.
Opposition and Approval
Initially, the restructuring plan faced considerable opposition, notably from property owner British Land, who deemed the proposals "fundamentally unfair." However, Modella introduced several concessions, which ultimately led British Land to withdraw its objections. Numerous suppliers are also expected to incur significant financial losses as a result of the restructuring.
The restructuring plan anticipates that the business will ultimately operate 302 stores, with the final number dependent on how many landlords choose to terminate their leases rather than accept reduced rents. Mr. Justice Hildyard, presiding over the case, was tasked with determining the fairness of the restructuring – specifically, whether creditors would be in a worse position under the plan compared to if the retailer entered administration.
This morning, Mr. Justice Hildyard granted approval for Modella's plans. While he did not provide his reasons in court, a summary of his judgment is slated for publication.
Company's Response
Alex Willson, Chief Executive of TG Jones, expressed his satisfaction with the court's decision. He stated, "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."
Source: Original Article
