TG Jones is to close up to 150 stores as the High Court approves the rescue

The owner of TG Jones, the business carved out of the old WH Smith site, has received High Court approval for a clean restructuring that will see it close 150 stores and result in rent reductions for all remaining stores.

Modella Capital acquired the chain last year and rebranded it as TG Jones, stripped of the name it had traded under for more than two centuries after WH Smith sold its loss-making bricks-and-mortar arm to focus on travel retail. The chain currently has 451 stores and employs 4,700 people. WH Smith’s travel stores at train stations and airports were not part of the deal, and the group retained the rights to the landmark brand.

In less than a year, Modella has gone ahead with a drastic rescue plan, blaming “challenging retail conditions”. In addition to the closure, approximately 120 landlords will not receive rent for up to three years, while rents in hundreds of other stores will be reduced by between 15 and 75 percent. Modella says the program is important for the business to continue and that some of the money saved will be reinvested in the stores as part of a wider change.

The High Court heard this week that the retailer is on the brink of bankruptcy, facing a cash deficit of almost £8m by the end of the week unless the deal is completed. Tom Smith KC, for TG Jones, told the court the business was “very depressed” and “full of rubbish at the moment”. He said it would have run out of cash in April but for a £10m loan from Modella and debt deferrals, including a huge tax debt owed to HMRC.

Modella laid part of the blame on underinvestment by the chain’s previous owners, arguing that long-term sales had been declining. It also pointed to current trading pressures and the loss of the WH Smith name, which is compounded by the difficulties the business flagged earlier this year when TG Jones faced the threat of bailiffs over unpaid tax and business rates.

The proposals met with strong opposition, led by property group British Land, who called them “absolutely wrong”. Modella softened the terms with a series of concessions, persuading British Land to drop its challenge. Many providers also experience great financial success.

The plan predicts that TG Jones will eventually have up to 302 stores, depending on how many landlords choose to terminate their leases rather than accept reduced rents.

The judge, Mr Justice Hildyard, had to assess whether the restructuring was fair, and in particular whether the creditors would be worse off under this scheme than in management, the main test of a restructuring scheme of this type under the Companies Act. He gave the plan the green light this morning, describing it in the summary of his judgment as “complex in its terms and in its far-reaching effect”.

He said he was deeply concerned about the potential impact on homeowners, but ultimately believed the deal was “the lesser of two evils” that stemmed from the company’s “commercial failure and financial problems.”

Alex Willson, chief executive of TG Jones, welcomed the decision. “This decision allows us to continue with our strategy to change the situation,” he said. “This program protects the core of the store and makes TG Jones a strong, sustainable business. We are incredibly grateful to all our partners, partners and stakeholders who have been constructively involved throughout this process, and to Modella Capital for their continued financial commitment.”

The decision goes against the penal background of physical sales. The Center for Retail Research, which tracks the rate of store closures and job losses across the UK’s high street, has warned that closures are at their highest rate in years as rising costs, high business rates and weak footfall continue to erode the case of large shopping centres. Pressure has been building across the sector, with business rates being repeatedly cited as a driver of accelerating road closures.