The new owner of The Original Factory Shop (TOFS) is drawing up plans for a radical restructuring of the discount retailer just weeks after taking control.
Sky News has learnt that Modella Capital – one of two remaining bidders for WH Smith’s high street arm – has drafted in advisers to explore options for TOFS including a company voluntary arrangement (CVA).
City sources said on Tuesday that Interpath had been engaged to work on the plans.
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Modella is said to be examining a CVA with a view to closing underperforming stores and forcing through rent cuts on others.
A major distribution centre is also thought to feature in potential proposals for a restructuring.
It is not thought to be focused on compromising other classes of creditors.
Any so-called ‘landlord-led’ CVA which triggered store closures would inevitably lead to job losses among TOFS’ workforce, which was said to number about 1,800 people at the time of last month’s takeover.
Further details of the plans, including the timetable for launching a CVA – which requires court and creditor approval – were unclear on Tuesday.
TOFS, which sells beauty brands such as L’Oreal, the sportswear label Adidas and DIY tools made by Black & Decker, trades from about 180 stores.
The chain, which was founded in 1969, was bought by the private equity firm Duke Street in 2007.
Duke Street had tried to sell the business before, having supported it through the COVID-19 pandemic with a cash injection of more than £10m.
It sold the company to Modella with no remaining bank debt.
The possible CVA at TOFS comes amid a frenetic period of dealmaking for Modella.
In addition to vying with Alteri Investors for the historic WH Smith high street chain, it is pursuing a restructuring of the Hobbycraft chain it acquired last summer, Sky News reported last week.
Rival bidders for TOFS are said to have included family office Baaj Capital, Mike Ashley’s Frasers Group and Poundstretcher, which is owned by the investment group Fortress.
Modella and Interpath declined to comment.
