Toys 'R' Us files for bankruptcy ahead of the holiday season

Toys R US Kungens Kurva september 2016 59c26d36af8ca

Toys R US Kungens Kurva september 2016 59c26d36af8ca

The company filed under Chapter 11 of the US bankruptcy laws late Monday, which will allow it to stay open and protect it from creditors' claims while it restructures its long-term debt of more than $5 billion.

The company's approximately 1,600 Toys "R" Us and Babies "R" Us stores around the world - "the vast majority of which are profitable" -? will operate as usual, it said.

The retailer said Monday night that, "to achieve its financial objectives, Toys'R'Us and some of our USA subsidiaries and our Canadian subsidiary proactively and voluntarily filed for Chapter 11 of the Bankruptcy Code in the U.S".

Toys R Us, crippled by U.S. $5 billion in debt and more powerful competition, filed for protection from its creditors before the key holiday trading season.

Much of the toy merchant's debt is the legacy of a $7.5 billion leveraged buyout in 2005 in which Bain Capital, KKR & Co. and Vornado Realty Trust loaded the company with debt to take it private.

Prior to filing, the chain secured more than $3bn in financing from lenders including a JPMorgan-led bank syndicate and certain existing lenders to fund operations while it restructures, according to a company statement. Toys R Us said its Canadian unit also meant to seek reorganization in the bankruptcy court in Ontario.

Toys "R" Us is building inventory for the holiday season and fourth quarter, which accounts for 40 percent of net sales. Toys "R" Us already offers some activities, such as birthday parties, at its stores. Mattel, the largest toymaker, called Toys "R" Us "one of our most important retail partners".

Toys "R" Us has $4.9bn in debt, $400mn of which has interest payments due in 2018, with a further $1.7bn due to be repaid in 2019. Sometimes this results in the company returning stronger than before, but there are cases where stores close down during restructuring.

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"Once these initiatives are implemented, Toys R Us stores will be interactive spaces with rooms to use for parties, live product demonstrations put on by trained employees, and the freedom for employees to remove products from boxes to let kids play with the latest toys", CEO David Brandon said in court papers.

The 69-year-old toy store has filed for bankruptcy protection as it tries to reorganize.

About Toys " R " Us, Inc.

The message from Toys "R" Us Inc.

Toys R Us traces its roots to 1948, when founder Charles Lazarus opened a baby furniture store in Washington.

Yes. Your "R" Us Credit Card will continue to be accepted.

Analysts said buyers have moved online over the years, as well as choosing home delivery, while discounters like Wal-Mart and Target have captured market share.

The Associated Press reported that GlobalData Retail estimates that in 2016 about 13.7 percent of toy sales were made online, up from 6.5 percent five years ago.

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