TG Jones has secured High Court approval for its restructuring plan, clearing the way for the former WH Smith high street business to push ahead with a rescue deal that could see up to 150 stores close.
The retailer, which was acquired by Modella Capital last year and rebranded as TG Jones, had warned it could fall into administration without approval for the plan.
The restructuring is expected to reduce the group’s lease liabilities across its store estate while unlocking new funding to support the turnaround.
The plan had faced opposition from a number of landlords, including British Land-linked creditors, amid concerns over the scale of rent cuts being imposed on property owners.
However, improved terms offered during the court process helped soften opposition, with six British Land-associated landlords moving from opposing the plan to taking a neutral stance.
Under the revised proposal, landlords are understood to have secured a larger share of potential future profits than has previously been seen in a Part 26A restructuring plan, as well as the deferral rather than full write-off of some future rent arrears, backed by a security package.
Hossein Dabiri, a restructuring expert at Debtwire said the ruling showed how important Part 26A plans had become for retailers and other businesses burdened by large leasehold liabilities.
“The High Court’s approval of the TG Jones restructuring plan reinforces how important Part 26A plans have become for companies with large leasehold liabilities, following similar recent restructurings at household names including Poundland, River Island, Superdry and Pizza Express,” Dabiri said.
Part 26A restructuring plans allow courts, in certain circumstances, to impose a deal on dissenting creditor classes through a mechanism known as a “cross-class cram down”.
Dabiri said this had made it easier for companies to pursue “faster and more aggressive restructurings”, particularly when renegotiating retail leases.
However, they added that the concessions secured by landlords in the TG Jones case showed the process was “not limitless” and that creditors still retained leverage, even when they were unlikely to recover money in an insolvency scenario.
Mr Justice Hildyard also criticised the severe time pressures placed on the court, warning that even powerful restructuring tools work best when companies engage early rather than waiting until a severe liquidity crisis leaves limited room for manoeuvre.
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