Up to 150 former WH Smith High Street shops are to close after a High Court judge approved a sweeping restructuring plan for the chain’s owner, TG Jones – a rescue the company’s lawyer described as that of a business “running on fumes”.
Mr Justice Hildyard gave the green light on Tuesday morning to the plan proposed by Modella Capital, which bought the stores last year and rebranded them under the name TG Jones. The judge said he had been “most concerned about the potential financial impact on landlords”, but was persuaded the deal was “objectively, the lesser of two evils” given the company’s “trading failures and financial predicament”.
“Up to 150 former WH Smith High Street stores to close after court approves rescue deal for TG Jones.”
The restructuring comes barely a year after Modella acquired 451 stores employing 4,700 workers. The travel stores operated by WH Smith in railway stations and airports were not part of the deal, and the historic brand name remains with the original company.
Modella blamed “challenging retail conditions” and serious underinvestment in stores by previous owners for the chain’s decline. The High Court heard this week that TG Jones was on the brink of insolvency, facing a cash shortfall of nearly £8m by the end of this week unless the rescue was approved.
Tom Smith KC, for TG Jones, told the hearing the business was “highly distressed” and would have run out of cash in April had it not been for a £10m loan from Modella and a deferral of liabilities including a large tax bill from HMRC.
As well as the closure of up to 150 stores, the plan imposes severe financial pain on landlords: 120 of them will receive no rent for up to three years, while rent on hundreds of other stores will be cut by between 15% and 75%. Modella said the cost savings were vital for the business’s survival and would be partly reinvested in a turnaround strategy.
Property giant British Land led opposition to the plans, describing them as “fundamentally unfair”, but dropped its objections after Modella offered several concessions. Many suppliers are also taking a significant financial hit.
The restructuring forecasts that TG Jones will ultimately end up with 302 stores, depending on how many landlords choose to terminate leases rather than accept reduced rents. Mr Justice Hildyard described the plans as “complex in their terms and far-reaching in their effect”.