The former WH Smith chain, hastily rebranded as TG Jones after its acquisition by Modella Capital, is now at the center of a high-stakes restructuring that could lead to up to 150 store closures and thousands of job cuts. The low-profile investment group has positioned itself as a key creditor, landlord, and brand owner, raising questions about the chain's future.
A Cut-Price Deal
WH Smith, a 233-year-old staple of the British high street, was bought by Modella Capital last summer. The deal, initially valued at £76 million including £52 million in cash, was later reduced to about £40 million in equity due to softer trading. Only £10 million was paid upfront, with further payments contingent on performance and tax asset realizations. Documents reveal that Modella expects to pay no more than £20 million in total, plus taking on debts.
Modella's Strategic Moves
Modella has already taken control of key assets, including TG Jones's Swindon headquarters, purchased for £7 million shortly after the acquisition. The firm is now owed £2.1 million in rent, which will be written off if the restructuring plan is approved. Modella also owns the rights to the TG Jones brand and charges a 1.03% royalty on net revenue, though these fees are on a no-cash basis under the deal with lender Aurelius.
Financial Pressures and Restructuring
TG Jones has stopped paying business rates and delayed supplier payments to conserve cash. The company warned creditors that it faces a cash shortage if the restructuring is not approved, after sales fell 12% between September and March. Modella has lent £10 million at 12% interest to keep the chain afloat, with no cash payments made so far. Aurelius, which provided a rescue loan of up to £35 million, will increase its loan to £40 million under the plan.
Modella's Track Record
Modella, founded four years ago by restructuring professionals, has gained a reputation for rapid and aggressive restructurings. It previously oversaw the collapse of Claire's and The Original Factory Shop, resulting in about 2,500 job losses. The firm now controls businesses totaling around 900 shops and 10,000 employees. Its approach includes using company voluntary arrangements to reduce rents and close stores soon after takeovers.
Uncertain Future
Retail insiders expect about 100 store closures, given changing shopping habits and online competition. TG Jones faces challenges from rivals like The Works and Card Factory. One creditor gave the chain a one-in-three chance of success, while experts note that Modella's ability to combine restructuring with a genuine retail turnaround will be critical. Modella declined to comment on the situation.
