A UK high street giant with centuries of history behind it is on the brink of insolvency after a court appeal process was delayed. A multi-million pound payment is due this week and would likely go unpaid should the court further delay its ruling. TG Jones, the former WHSmith high street business which was bought out by Modella Capital, is facing the harsh reality of insolvency.
A court appeal had been delayed due to opposition from landlords and suppliers, with some smaller suppliers expected to suffer significant losses if the restructuring goes ahead. The proposed restructuring would see 150 stores close as part of a three-year funding plan for the business which would also see a £35m cash injection from Modella Capital.
Mr Justice Hildeyard said he needed more time to consider the complex case, leaving the future of the business hanging in the balance, per Retail Gazette. The delay puts around 480 stores and 5,000 jobs at risk, as TG Jones races to secure approval for a restructuring that would allow it to cut costs and keep the business trading.
TG Jones has been under pressure since the takeover, with the business battling high costs and weak trading. The general decline of the high street has also harmed the chain’s hopes of rebranding. It is feared that insolvency proceedings could begin before TG Jones has the chance to restructure.
Tom Smith KC, for TG Jones, told a hearing on Monday that the business is “highly distressed” after suffering “long-term sales decline”. He said the “working assumption” is that around 150 of these will close as a result of the plan, as landlords who do not wish to accept the reduced rate can choose to terminate the lease.
Mr Smith added that paying tax, rent, suppliers and payroll this week would leave the company with an £8million shortfall. In written submissions, he confirmed: “As is well known, the UK retail sector has faced serious trading difficulties in recent years.
“The problems facing the sector have their roots in macroeconomic factors such as high inflation, the shift to online shopping, reduced consumer spending, higher labour costs and increased taxes.”
Ben Shaw KC, for the group of landlords, said the rentiers are not opposed to the plan following recent negotiations over the deferral of rent payments in the first year of the plan. Mr Justice Hildyard is expected to give a decision on Wednesday.
Alex Willson, CEO of TG Jones, said: “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.”