It is a peculiar arrangement in the world of retail finance: a company paying millions of pounds for the right to use a brand name that, for all intents and purposes, does not exist. The name is TG Jones, a “family” brand created out of thin air to replace the iconic WH Smith signage on hundreds of British high streets.
But as the stores struggle to survive, the financial plumbing behind the scenes has come into focus. Modella Capital, the investment firm that purchased the high street chain from WH Smith last year for £76 million, is charging the retailer royalty fees for the use of this fictitious identity. While the stores face a liquidity crisis and the threat of mass closures, the owner is effectively billing its own acquisition for the privilege of using a name that consumers barely recognize.
The arrangement has emerged as part of an aggressive restructuring plan designed to save the business from administration. Documents reveal that Modella is currently owed £2.9 million in royalty fees. While the company has blamed a slump in consumer spending and a “forced” name change for its woes, creditors are now questioning the wisdom of a setup where a struggling retailer must pay its parent company a percentage of its dwindling revenue just to keep the lights on.
The Cost of a Fictitious Identity
The transition to TG Jones was a requirement of the sale. To protect the value of the WH Smith brand—which remains a powerhouse in “travel” locations like airports and railway stations—the high street stores had to be rebranded. This created a legal firewall between the stock-market-listed parent company and the new high-street entity.
Under the current royalty agreement, TG Jones pays 1.03% of its net revenues each month to Modella. If the proposed restructuring plan is approved, this fee could potentially skyrocket to 15% of net revenue. To a financial analyst, this looks less like a brand licensing deal and more like a mechanism to extract value from the company’s books, regardless of its operational health.
The financial strain of this rebranding has been tangible. Since the switch from the WH Smith name, sales have slumped by 12%. The company itself admitted that the “forced name change” negatively impacted consumer awareness, stripping away the instant trust and loyalty associated with a century-old household name.
A Rescue Loan and a Frozen Account
The situation has grown so precarious that a third party has had to step in to manage the cash flow. Aurelius, a finance company with a controversial track record—including its ownership of The Body Shop before its 2024 collapse—recently lent TG Jones £25 million.
As part of this lifeline, the royalty fees owed to Modella are not being paid directly to the investment firm. Instead, they are being diverted into an account controlled by Aurelius. This arrangement acts as a safeguard, preventing Modella from cashing in on the royalties until the £25 million loan is repaid. Essentially, the lender is ensuring that the money stays within the business to pay creditors rather than flowing upward to the owner.
The debt continues to mount. Because the agreement does not always require an immediate transfer of cash, the royalties often build up as a debt on the balance sheet. This creates a precarious scenario where the debt could be triggered if the business returns to profitability or, more likely, if it falls into the hands of administrators.
The Restructuring Gamble
TG Jones is now fighting for its life. The company has admitted it is facing “acute cashflow and liquidity pressures,” exacerbated by rising employer national insurance contributions and the national living wage. To avoid total collapse, Modella has proposed a restructuring plan that creditors have described as “tough to swallow.”
The plan involves a drastic reduction in overheads and a significant shrinking of the store estate. The following table outlines the current financial liabilities facing the retailer:
| Liability Category | Amount Owed/Deferred | Status |
|---|---|---|
| Suppliers | £4 million | Payments delayed |
| Business Rates | £3.4 million | Payments deferred |
| HMRC | £8.4 million | 6-month delay agreed |
| Modella Royalties | £2.9 million | Outstanding/Debt |
Under the proposal, eight stores would close immediately, and Modella is seeking 100% rent holidays for approximately 100 more stores—most of which are expected to close if the plan is approved. For the remaining estate, the company is demanding rent reductions of up to 75% for a year.
A Pattern of Retail Volatility
For landlords and suppliers, this strategy is hauntingly familiar. Modella Capital has a history of aggressive restructuring that has not always ended well for the workforce or the high street. The firm previously owned Claire’s and The Original Factory Shop, both of which saw total store closures and the loss of roughly 2,500 jobs. Even Hobbycraft, another Modella-owned chain, underwent a similar restructuring process last year.
The current crisis has already triggered a domino effect with suppliers. Insurers have begun withdrawing cover for invoices sent to TG Jones, leading some suppliers to refuse shipments entirely or impose “materially worse” credit terms. When a retailer can no longer guarantee payment to the people who stock its shelves, the clock begins to tick very quickly.
Disclaimer: This article is for informational purposes only and does not constitute financial or investment advice.
The fate of the remaining stores now rests with the creditors and the courts. A vote on the restructuring plan is scheduled for late June, with the company aiming for final court approval by June 29. If the plan is rejected, TG Jones has warned it will likely be forced to call in administrators.
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