An investment firm that acquired the previous WH Smith high street outlets is imposing significant licensing fees on the retailer for the use of its controversially received TG Jones brand, according to reports from the Guardian.
Modella Capital, which purchased the chain from WH Smith’s parent company last year, cited declining consumer spending as it unveiled a restructuring strategy that may result in the closure of 150 out of its 450 locations. The firm also indicated that the mandatory rebranding from WH Smith has adversely affected brand recognition among consumers.
Documents reviewed by the Guardian revealed that Modella, which invested £76 million in the transition of the paper and stationery business, is currently owed £2.9 million in royalties for the use of the TG Jones name, a brand that has faced criticism.
The rebranding to TG Jones was implemented to differentiate the chain from the WH Smith stores located in train stations, airports, and hospitals, which remain under the ownership of the original publicly traded parent company. This branding agreement was established at the time of the acquisition.
As part of the licensing arrangement, TG Jones pays Modella 1.03% of its net revenues on a monthly basis, with the potential for this rate to rise to as much as 15% following the approval of the restructuring plan.
Currently, the royalty payments are being placed in an account managed by Aurelius, a financial institution that provided a £25 million loan to TG Jones earlier this month. This setup, negotiated between Modella and Aurelius, will persist until the loan is fully repaid.
This arrangement is intended to restrict Modella’s access to the funds without Aurelius’s consent. After the loan is settled, Modella will directly receive the licensing fees from TG Jones.
The outstanding royalty fees, which have accumulated since June and currently total £2.9 million, could be waived by Modella if the restructuring plan receives approval.
Future royalty fees will still be owed but will be temporarily limited to 50% of their current amount until March of next year, after which they will revert to the full rate.
It has been noted that the agreement does not necessitate an immediate cash transfer from TG Jones but rather builds a liability on its balance sheet. This debt could be settled with Modella if the company enters administration or returns to profitability.
Aurelius previously owned The Body Shop before it went into administration in 2024.
The details of the licensing agreement surfaced in a document outlining an aggressive restructuring plan that could lead to store closures and significant rent reductions for many locations.
TG Jones has indicated that it may need to enter administration if creditors do not support the restructuring proposal.
A creditor described the restructuring process as “quite aggressive” and “difficult to accept,” expressing surprise at the licensing fee arrangement.
In an effort to conserve resources, TG Jones has halted payment of business rates and postponed payments to suppliers, warning creditors of potential insolvency as sales have dropped since September.
The retailer currently owes suppliers £4 million and has deferred £3.4 million in business rates. It has arranged to delay a £8.4 million payment to HMRC over a six-month period following an £18.6 million loss reported between September 2025 and March of this year.
The restructuring documentation indicated that sales have significantly declined as the brand transitioned from WH Smith to TG Jones, with a reported decrease of 12% between September and March.
The retailer’s financial challenges led to suppliers’ insurers withdrawing coverage for invoices to TG Jones, causing some suppliers to refuse to deliver goods and others to offer “significantly worse” terms.
TG Jones stated it is currently experiencing severe cash flow and liquidity challenges due to the erosion of customer loyalty linked to the WH Smith brand, ongoing inflation, and recent unfavorable fiscal policies, including hikes in employer national insurance contributions and the national living wage.
The proposed restructuring plan includes immediate closure of eight of the remaining 450 stores, with Modella seeking full rent holidays for around 100 additional locations, which are likely to shut down if the plan is ratified by late June.
Moreover, the company is requesting 75% rent reductions for hundreds of other stores for one year, with further reductions between 15% and 75% extending beyond that period.
Modella characterized the restructuring plan as a crucial element of the company’s recovery strategy, committing to invest £35 million. The firm asserted that this initiative aims to safeguard the core of the store portfolio and build a more robust, sustainable business that can continue to serve customers in the long term.
Creditors, including landlords, are expected to vote on the restructuring proposal by late June, with the goal of obtaining final court approval by June 29.
However, TG Jones may find it difficult to garner support from landlords, especially following the recent failures of other Modella-owned brands, such as Claire’s and The Original Factory Shop, which resulted in the closure of all stores and approximately 2,500 job losses. Modella’s Hobbycraft chain also closed several outlets under a restructuring initiative last year.
The WH Smith travel stores, which were not included in last year’s acquisition and continue to be owned by the publicly listed company, remain unaffected by these developments.
Modella has chosen not to comment on the matter.
