Small suppliers including the charity Help for Heroes are set to lose at least half the money owed to them by the former WH Smith high street chain if a planned restructuring is voted through this week. The retailer, now rebranded as TG Jones after being acquired by private equity firm Modella Capital last year, has warned that it may need to call in administrators if creditors do not approve the amended plan in a vote on Wednesday.
Impact on Suppliers and Creditors
Dozens of "exit contract" suppliers, including toy makers and greetings card companies, would have their debts wiped out entirely under the proposal. These suppliers would only retain the right to a share of future profits above a certain level, starting in three years. Other "non-core" suppliers, such as Help for Heroes, would receive less than half of what they are owed, with the remainder deferred for three and a half years.
One card maker, a long-standing supplier, described the situation as a "significant write-off" for their business. The supplier lost money not only on cards sold but also on stock provided on a "sale or return" basis that remains in stores slated for closure. Another small supplier said they were "absolutely broken" by the potential loss of several thousand pounds, which would "hit my family hard." Help for Heroes, which partnered with WH Smith in 2014, has raised over £71,000 through Christmas card sales.
Restructuring Plan Details
TG Jones is asking all suppliers, including large companies like Condé Nast, Ferrero, and Lonely Planet, to accept delayed payments. These "core suppliers" will not be repaid in full for a year, with monthly instalments starting six months after approval. The company owes suppliers £4 million, according to its announcement last month.
The restructuring plan, launched by Modella Capital, could lead to the closure of up to 150 stores and rent reductions on dozens more. Modella has committed to investing £35 million as part of the turnaround, stating that the plan is "designed to protect the substantial core of the store estate and create a stronger, more sustainable business."
Landlord Negotiations and Legal Challenges
Modella recently amended the plan to offer landlords improved terms, including a larger share of future profits and repayment of rent cuts on key sites after three years. This won over British Land, which had previously sought to delay the vote through legal action. British Land's lawyers had argued that the plan was a "wholly unfair allocation of the burdens and benefits" amounting to a "naked transfer of value" to Modella. Other landlords, including M&G, LandSec, and NewRiver REIT, had supported British Land's position but their current stance is unclear.
On Tuesday, British Land announced it would withdraw its opposition and abstain from voting, citing "material concessions" that mitigated unfairness to landlords. A spokesperson stated that the plan should not be used to penalize landlords providing profitable stores at fair market rents for the benefit of shareholders. One landlord expressed hope for a more balanced plan.
TG Jones's travel stores in railway stations and airports were not part of the Modella deal and remain under the original parent company. A TG Jones spokesperson said they had engaged constructively with landlords and improved the plan's terms to reflect feedback, demonstrating a commitment to a satisfactory outcome for all stakeholders.
