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Toys 'R' Us reportedly preparing for bankruptcy before Christmas

The retailer could file for bankruptcy in a matter of weeks (Bob Levey/Getty Images for Toys ‘R’ Us)

Toys ‘R’ Us is reportedly planning to file for bankruptcy before the holiday season, according to sources.

Comments published by Reuters and the Wall Street Journal, suggest that the toy retailer could be forced to file for bankruptcy within a matter of weeks, after it has faced tighter terms from suppliers ahead of the Christmas season.

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Toys ‘R’ Us has struggled to compete in the current market as consumers increasingly shop online with retailers such as Amazon.

If it files, the bankruptcy will be the biggest to take place this year. Toys ‘R’ Us has around $5 billion in debt and more than 1,600 stores worldwide.

The Wall Street Journal reported that the company was considering filing for Chapter 11 protection in the US Bankruptcy Court.

Toys ‘R’ Us would need to obtain a loan of several hundred million dollars as part of any possible bankruptcy filing in order reassure the chain’s vendors it could pay them for the products needed to stock its shelves for the holiday season, sources said.

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According to sources, part of the retailer’s current financial problems stem from vendors demanding tighter repayment terms over fears that Toys ‘R’ Us may file for bankruptcy.

The retailer has previously said that it working with an investment bank to assess options for about $400 million in debt that comes due next year.

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Toys ‘R’ Us opened a store in New York City’s Times Square this year to capture more holiday shoppers.

The firm has been approached by Yahoo Finance for comment.