Up to 150 ex-WHSmith high street stores to close as resue deal approved
The owner of WH Smith’s former business on the High Street, TG Jones, has received approval for a major restructuring which will see the closure of up to 150 stores and major rent cuts at many of the remaining stores.
Modella Capital acquired the chain stores last year and later rebranded under the TG Jones name. There are currently 451 stores employing 4,700 workers.
WH Smith travel stores in train stations and airports were not part of the deal and the business retained the rights to the historic brand name.
But less than a year later, Modella announced a radical restructuring plan, blaming “challenging retail conditions”.
In addition to the store closures, approximately 120 landlords will not be able to receive rent for up to three years; and the rents of hundreds of other stores will be cut between 15% and 75%.
Modella says the plans are vital to the survival of the business and it will use some of the cost savings to invest in stores as part of its turnaround strategy.
The High Court heard this week that the retailer was on the verge of collapse and would face a cash shortfall of around £8 million by the end of this week unless the rescue deal was approved.
Tom Smith KC, for TG Jones, told the hearing the business was “extremely troubled” and was “running on fumes at the moment”.
He said the business would have been cash-strapped in April had it not been for debt deferrals, including a £10 million loan from Modella and a huge tax bill from HMRC.
Part of the problems stemmed from the chain’s previous owners severely underinvesting in the stores, and long-term sales were declining, Modella said.
But he also attributed the current weak trading to “challenging retail conditions” and an inability to protect the WH Smith brand name.
There was significant opposition to the plans, led by property owner British Land, who described the plans as “fundamentally unfair”. Modella sweetened the deal with various concessions, which persuaded British Land to abandon its opposition. Many suppliers are also taking a big financial hit.
The restructuring plan sees the business having 302 stores, depending on how many landlords exercise their right to terminate the lease rather than accept reduced rents.
The judge, Mr Justice Hildyard, had to decide whether the restructuring was fair and whether creditors would be worse off than if the retailer had gone into administration.
Mr Justice Hildyard gave Modella’s plans the green light this morning. He did not explain his reasons in court, saying that the summary of his decision was being published.
TG Jones CEO Alex Willson welcomed the court’s approval.
He said: “This decision allows us to move forward with our turnaround strategy.
“The plan preserves a significant proportion of store space and makes TG Jones a stronger, more sustainable business.
“We are incredibly grateful to all our colleagues, partners and stakeholders who have been constructively involved throughout the process, and to Modella Capital for its ongoing financial commitment.”
