Yahoo Finance Toys 'R' Us files for bankruptcy protection in US
Toys ‘R’ Us has filed for bankruptcy protection in the US, as the retailer struggles to compete with consumer appetite for online shopping and discount chains.
The filing, which is among the largest ever by a speciality retailer, comes just as Toys ‘R’ Us is gearing up for the holiday shopping season, which contributes to the bulk of its sale.
It casts a shadow on the future of Toys ‘R’ Us’ 1,600 stores worldwide which employ 64,000 staff members.
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Neil Saunders, managing director of GlobalData Retail, said the decision did not necessarily spell the end for Toys ‘R’ Us, but that it “brought to a close a turbulent chapter in the iconic company’s history”.
The filing comes shortly after numerous reports suggesting that the retailer was gearing up to file for bankruptcy in order to meet tighter supplier demands in the run up to Christmas.
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A $6.6 billion buyout in 2005 led by by private equity and investment firms has saddled the company with debt.
Toys ‘R’ Us will be hoping that the financing, a $3 billion commitment from lenders including a JPMorgan-led bank syndicate and some of the firm’s existing lenders, will help to reassure suppliers that they will be paid for products shipped to Toys ‘R’ Us in time for Christmas.
The firm’s operations in Australia and Europe and a joint venture in Asia are not part of the bankruptcy proceedings.
“We expect that the financial constraints that have held us back will be addressed in a lasting and effective way,” the firms’s chief executive Dave Brandon said.
“Together with our investors, our objective is to work with our debtholders and other creditors to restructure the $5 billion of long-term debt on our balance sheet.”
The company’s Toys ‘R’ Us and Babies ‘R’ Us stores and e-commerce sites around the world are open for business, it said.
The company opened a temporary store in New York City’s Times Square this year to capture more holiday shoppers, almost two years after it closed its flagship store barely a block away, driven out by high rents.
With assets of $6.9 billion based on its most recent annual report, it’s the second-largest retail bankruptcy, trailing the filing in 2002 by Kmart, which had $14.6 billion in assets, according to research firm Bankruptcydata.com.
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Toys ‘R’ Us is the second-largest toy seller in the United States behind Amazon.
“What they have going for them is they are the last major player in their market,” said David Berliner, a partner and restructuring specialist with BDO Consulting.
“The vendors don’t want to see them fail, so I think they have a good opportunity to survive.”
Toys ‘R’ Us filed the petition in the U.S. Bankruptcy Court for the Eastern District of Virginia in Richmond, Virginia.
