The high court has approved a sweeping restructuring plan for TG Jones, the company formerly known as WH Smith, leading to the closure of up to 150 high street stores. The decision, handed down by Mr Justice Hildyard, allows the retailer to write off debts to suppliers and reduce rent for many landlords, a move that could affect thousands of jobs.
Restructuring details and impact
TG Jones, which operates 450 stores and employs about 5,000 staff, was acquired last year by private equity firm Modella Capital, also owner of Hobbycraft. The company had warned it might need to call in administrators if the plan was not approved. Under the restructuring, small suppliers—including card and toy makers—are expected to lose at least half of the money owed to them.
Alex Willson, chief executive of TG Jones, stated: “We welcome the court’s approval of our restructuring plan. 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.”
Court criticism and financial challenges
Despite approving the plan, Mr Justice Hildyard criticized the short time given for the court to consider the matter. TG Jones’s lawyers had earlier described the retailer’s financial position as “horrendous,” revealing a cash shortfall of nearly £8 million by the end of the week due to deadlines for rent, worker pay, and tax. The judge also noted it was “difficult to swallow” that Modella valued TG Jones at no more than £3 million after the restructure, compared to its acquisition value of about £40 million just a year ago.
Creditor voting and cram down mechanism
More than 80% of landlords controlling TG Jones’s top stores voted to support the deal last week, while most other classes of landlords—facing steep rental cuts—voted against it. The plan required approval from just one class of creditor (with 75% or more backing) and the high court judge to proceed. Only 72% of business rates creditors (mostly local councils) backed the plan, and less than a third of general creditors (including card makers and pen brands) approved it. No landlords owning unwanted stores where rent will be cut to zero or stores will be closed supported the plan.
Hossein Dabiri, head of court reporting in Europe for Debtwire, commented: “The approval of the restructure under what is known as a ‘cram down’ model … has made it easier for companies to pursue faster and more aggressive restructurings, particularly when renegotiating retail leases.”
