TG Jones, a major UK high street chain with branches in Birmingham, is on the brink of collapse as its owner Modella Capital battles to secure creditor support for a drastic restructure. The plan would close up to 150 of its 450 shops but aims to keep the business afloat and save thousands of jobs. The chain currently employs around 5,000 people.
Creditors Offered Revised Terms
According to The Sunday Times, TG Jones has offered creditors a package of revised terms, promising them a greater share of future profits in return for backing the turnaround plans. If approved, the restructure would impose steep rent cuts on remaining landlords. Landlords of more than 120 stores would receive no rent for three years, while rents on hundreds of other stores would be slashed by between 15% and 75%.
Modella's Forecast and Tax Assets
In restructure documents sent to creditors, Modella stated: “Based on current forecasts, and trading conditions to date, the only further sums to be paid to WH Smith in the near term are expected to be in relation to the realisation of relevant tax assets within the business.” These tax assets are estimated to be worth about £8 million, meaning the total takeover could involve no more than £18 million going to WH Smith.
Creditor and Expert Opinions
Speaking to The Guardian, one creditor expressed cautious optimism: “I think they genuinely believe they can make a good fist of it and are creating a national retailer.” However, the source added: “I wouldn’t give them more than a one in three chance.”
Vernon Dennis, head of business advisory at law firm Howard Kennedy, commented: “This is a high-stakes test for Modella; if it can combine a restructuring of its balance sheet and consequent cost discipline with a genuine retail turnaround, TG Jones could stabilise; if not, it risks becoming a larger version of the failures we’ve already seen.”
