Landlords lose out and suppliers face heavy write-downs
The High Court has approved a rescue plan for TG Jones, the former WH Smith high street chain, clearing the way for 150 store closures and rent cuts across the rest of the estate.
Mr Justice Hildyard sanctioned the restructuring plan this week after private equity owner Modella Capital warned the retailer would collapse into administration within days without it. The company had an £8m shortfall in tax, rent, supplier, and payroll bills due by the end of the week, with £14.1m owed on Tuesday alone and a further £3.1m owed to suppliers on Friday, according to court reporting by The Guardian.
Around 300 of the 450 stores are expected to stay open. Landlords at the 150 loss-making sites face a choice: accept sharp rent cuts or end the leases and lose the tenant. The chain employs about 4,700 staff.
Approval unlocks a £15m loan from Modella, on top of £10m the firm advanced in April. Modella bought the high street business from WH Smith last year for an initial £10m.
Multiple groups of landlords and smaller creditors voted against the deal, but lenders and most suppliers backed it. Under the Part 26A restructuring rules, a judge can force the plan through over objections if at least one creditor class supports it and the court considers the terms fair. Suppliers TG Jones no longer wants to use face having their debts wiped out entirely. Non-core suppliers, including toymakers, card companies, and publishers, will recover less than half of what they are owed upfront and may wait more than three years for the rest, The Telegraph reported.
Industry figures called it the most aggressive high street restructuring the UK has seen.
Landlords previously described the deal as a ‘stitch-up’. Industry figures called it the most aggressive high street restructuring the UK has seen.
Alex Willson, chief executive of TG Jones, said the plan ‘protects the substantial core of the store estate and makes TG Jones a stronger, more sustainable business’.
Tom Smith KC, acting for the company, told the court the business was ‘highly distressed’ after a ’long-term sales decline’. He blamed high inflation, the shift to online shopping, rising labour costs and higher taxes.
That framing deserves a closer look. Inflation is not a natural weather event. Prices across the shelves of shops like TG Jones rose because the Bank of England created hundreds of billions of pounds out of nothing during and after the pandemic. That money flooded the economy through cheap borrowing, and the result was the pound buying less. Households cut back. Retailers with thin margins and high fixed costs were the first to feel it.
Cheap borrowing also propped up businesses that would not have survived a normal interest rate environment. When rates rose to fight the inflation the Bank itself had caused, weaker retailers were exposed. TG Jones, saddled with expensive leases signed in easier times and now competing with online sellers with lower overheads, is one of them.
Higher taxes have added to the pressure. Employer National Insurance rises and business rates hit shops with staff and physical premises hardest. Every pound taken in tax is a pound the business cannot spend on wages, stock or rent.
Modella Capital is a private equity firm funded by investors, not public money. WH Smith, still listed on the London Stock Exchange, kept its profitable travel business and refused to license the WH Smith name to the buyer, forcing the rebrand to TG Jones. That decision, confirmed in industry reporting, stripped the high street chain of two centuries of brand recognition overnight. The first WH Smith opened in 1792.
The Guardian’s original report noted the closures but did not set out how the Bank of England’s money printing drove the inflation now being blamed for the collapse.
Closures will begin shortly. The exact list of the 150 affected stores has not been made public.
