Judge warns TG Jones faces significant risks in turnaround

Mr Justice Hildyard has expressed serious reservations regarding the future prospects of the retailer formerly known as WH Smith, now operating under the name TG Jones. In a judgment published on Wednesday, the judge who previously approved a restructuring plan noted that the strategy carried very considerable risks for achieving a successful outcome. He described the initiative as having all the hallmarks of an adventurous equity play and suggested that its turnaround plans might appear to sceptics as generic aspirations rather than concrete grounds for confidence in success.

The legal ruling highlighted that execution risk is extremely high, noting that the company’s current valuation stands at approximately £3m. This figure represents a sharp decline from an acquisition value of about £40m recorded just one year prior. The judge indicated that this drop reflects the potential for both significant losses and profits within the business model.

The retailer, which recently employed around 5,000 staff members before restructuring, was acquired last year by Modella Capital. This private equity firm is also responsible for Hobbycraft and previously owned UK arms of Claire’s and The Original Factory Shop until their collapse earlier this year. Most recently, the group purchased Flying Tiger, a Danish homewares retailer with approximately 1,000 stores globally. While the original WH Smith owner continues to operate locations in transport hubs and hospitals, Modella quickly rebranded high street outlets as TG Jones.

Sales declined rapidly following the deal announcement, prompting warnings from management that administrators might be called upon if the restructuring plan failed. The approved scheme involves writing off debts owed to suppliers and reducing rent for many landlords. Court approval was required because a cram-down mechanism would impose the structure on dissenting creditor classes who rejected it due to financial losses.

Fewer than one third of general creditors, including card manufacturers and pen brands, supported the plan. Similarly, no landlords owning unwanted stores backed the proposal where rents were cut or locations closed. Small suppliers such as toy makers faced losing at least half their outstanding debts under the restructure. Hossein Dabiri from Debtwire noted that courts must carefully scrutinise such plans to avoid them becoming engines of abuse while weighing the danger of collapse for remaining national high street businesses.