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The Toyark › General Toy News › Toys “R” Us in USA and Canada Files For Bankruptcy Protection

Toys “R” Us in USA and Canada Files For Bankruptcy Protection

Posted on September 19, 2017 at 7:10 am by Joe Moore under General Toy News

Toys “R Us, the iconic toy chain, one of the last big box toy retailers, has filed for Chapter 11 Bankruptcy Protection in the USA and will begin to do so in the Canadian market as well. Their businesses outside of North America are not affected by this restructuring plan. They have made the filing in a bid to restructure the roughly $5 Billion in long term debt they have accumulated over the years. By filing for Chapter 11 protection, this will allow them to keep their approximately 1,600 Toys “R” Us and Babies “R” Us stores to operate as normal.

So what does this mean for us, the collectors, kids and families that shop Toys “R” Us? At the moment, not much. Since they are aiming at restructuring existing debt, their everyday operations will be largely unaffected in the short term. We’ll get a better sense of the long term future and any changes as the Bankruptcy proceeds through the courts and terms are imposed. Below is a press release from Toys “R” Us on their decision to file for Bankruptcy protection.


TOYS“R”US, INC. COMMENCES COURT-SUPERVISED PROCESSES TO IMPLEMENT FINANCIAL RESTRUCTURING

Files Voluntary Chapter 11 Petitions in U.S. and Intends to Seek Protection under CCAA in Canada;
Operations Outside U.S. and Canada Not Included in Proceedings

Toys“R”Us and Babies“R”Us Stores and Web Stores across the World are Open and
Continuing to Provide World-Class Experiences for Customers

Restructuring Process Expected to Enhance Financial Flexibility for Investments in Growth Initiatives

Company Receives Commitment of Over $3.0 Billion in Debtor-in-Possession Financing to Support Operations

WAYNE, NJ – September 18, 2017 – Toys“R”Us, Inc. (“the Company”) today announced that the Company and certain of its U.S. subsidiaries and its Canadian subsidiary have voluntarily filed for relief under Chapter 11 of the Bankruptcy Code in the U.S. Bankruptcy Court for the Eastern District of Virginia in Richmond, VA. In addition, the Company’s Canadian subsidiary today intends to seek protection in parallel proceedings under the Companies’ Creditors Arrangement Act (“CCAA”) in the Ontario Superior Court of Justice. The Company intends to use these court-supervised proceedings to restructure its outstanding debt and establish a sustainable capital structure that will enable it to invest in long-term growth and fuel its aspirations to bring play to kids everywhere and be a best friend to parents.

The Company’s operations outside of the U.S. and Canada, including its approximately 255 licensed stores and joint venture partnership in Asia, which are separate entities, are not part of the Chapter 11 filing and CCAA proceedings.

The Company’s approximately 1,600 Toys“R”Us and Babies“R”Us stores around the world – the vast majority of which are profitable – are continuing to operate as usual, providing customers with great service and a curated assortment of merchandise in the toy and baby categories. Customers can also continue to shop for the toy and baby products they are looking for online on the Company’s newly launched www.toysrus.com and www.babiesrus.com web stores. Customers should expect the Company’s loyalty programs, including its Rewards“R”Us, Geoffrey’s Birthday List and Babies“R”Us Registry, to continue as normal.

“Today marks the dawn of a new era at Toys“R”Us where we expect that the financial constraints that have held us back will be addressed in a lasting and effective way,” said Dave Brandon, Chairman and Chief Executive Officer. “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, which will provide us with greater financial flexibility to invest in our business, continue to improve the customer experience in our physical stores and online, and strengthen our competitive position in an increasingly challenging and rapidly changing retail marketplace worldwide. We are confident that these are the right steps to ensure that the iconic Toys“R”Us and Babies“R”Us brands live on for many generations.”

Mr. Brandon continued, “As the holiday season ramps up, our physical and web stores are open for business, and our team members around the world look forward to continuing to put huge smiles on children’s faces. We thank our vendors for their ongoing support through this important season and beyond. We also appreciate the strong support our investors have provided over time and the constructive role they are playing in this process that will allow us to create a brighter future for our company. And as importantly, we thank our team members in advance for their hard work and dedication to serving the millions of customers who will shop with us this holiday.”

The Company has received a commitment for over $3.0 billion in debtor-in-possession (“DIP”) financing from various lenders, including a JPMorgan-led bank syndicate and certain of the Company’s existing lenders, which, subject to Court approval, is expected to immediately improve the Company’s financial health and support its ongoing operations during the court-supervised process. Toys“R”Us is committed to working with its vendors to help ensure that inventory levels are maintained and products continue to be delivered in a timely fashion.

In conjunction with the Chapter 11 process in the U.S., the Company has filed a number of customary motions with the bankruptcy court seeking authorization to support its operations during the restructuring process and ensure a smooth transition into Chapter 11 without disruption, including authority to continue payment of employee wages and benefits, honor customer programs, and pay vendors and suppliers in the ordinary course for all goods provided on or after the filing date.

Additional information can be accessed by visiting the Company’s restructuring website at www.toysrusinc.com/restructuring, calling the Company’s Information Hotline, toll- free in the U.S. and Canada at (844) 794-3476, or sending an email to [email protected]. Court filings and other documents related to the court- supervised process in the U.S. are available on a separate website administered by the Company’s claims agent, Prime Clerk, at https://cases.primeclerk.com/toysrus. Information about the CCAA proceedings will be available on a separate site maintained by an independent monitor. The appointment of the monitor and address of the monitor website are expected to be announced later today.

Kirkland & Ellis LLP is serving as principal legal counsel to Toys“R”Us, Alvarez & Marsal is serving as restructuring advisor and Lazard is serving as financial advisor.

Discuss on the Toyark Forums› Views: 3143

Discussion / Comments (Jump to this Thread on the Forum)

  1. Joe Moore's Avatar Joe Moore says

    09-19-2017, 04:10 AM

    Toys "R" Us in USA and Canada Files For Bankruptcy Protection

  2. Dolemite's Avatar Dolemite says

    09-19-2017, 07:03 AM

    Hope it works out for them.

  3. JamesBenjamin has no avatar! JamesBenjamin says

    09-19-2017, 07:09 AM

    Toys R Us is owned by companies that are owned by the people who used to run Bain Capital. This is their business model: buy a working company, load it up with debt, then go into bankruptcy to release the debt and pay off the investors.

    Its how Mitt Romney made his millions.

    TRU will probly survive, but only because they're the last true toy store chain in the nation. Many companies that were fine before the investors bought them had to close their doors because of this type of investor buying them up.

  4. CoolToysOnly's Avatar CoolToysOnly says

    09-19-2017, 10:02 AM

    Even harder to get those marvel legends toys r us exclusives, also that hasbro Optimus prime masterpiece

  5. Boogieman4hire's Avatar Boogieman4hire says

    09-19-2017, 10:09 AM

    That still worries me. I'm still sad about K Mart. It would suck if they went down too.

  6. Exodus's Avatar Exodus says

    09-19-2017, 10:21 AM

    Quote:
    Originally Posted by CoolToysOnly View Post
    Even harder to get those marvel legends toys r us exclusives, also that hasbro Optimus prime masterpiece
    Yeah the Marvel Legends exclusives are so hard to get from them at times especially at stores. I've been fortunate to get all the Marvel and TF Exclusives online from them...

  7. rann has no avatar! rann says

    09-19-2017, 10:56 AM

    Very sad...but I can see why TRU is failing, and has been for several years. First, kids don't play with "toys" anymore, but TRU hasn't figured out that it needs to appeal to adult collectors, IMO. Like Saturday morning cartoons, most American toy manufacturers have faded away. I saw that a new 12" Captain Scarlet figure will be coming out in a few months. Would I EVER spot it at the local TRU? Dream on...

    I cannot stand to set foot in the TRU here...chockablock full of junk that has been sitting there since the place opened. I cannot even remember the last time I actually found anything I was looking for, and purchased it, at a TRU. Action figures? The pegs that aren't empty are clogged with the absolute lowest common denominator available. I suspect scalper employees hawk whatever they can on ebay. These days I find 90% of anything I need on Amazon or BBTS or a few Asian websites. Very sad. I would much prefer to patronize local businesses.

    I started collecting Kenner Super Powers figures in the early '80s. Still have 'em on my shelves. Even this little town had three independent toy stores in those days...two at the newly opened "mall." Remember those halcyon days? Back when Sears was THE go-to store for almost everything from blue jeans to car repair? Now our mall (minus every "anchor store") is a run-down hang out for parking lot thugs. Yet the #1 place for toys here, for many years, was Target. They got the latest Kenner & ToyBiz figures in profusion. I could pick & choose the best paint jobs. Later I was able to shop for a wide range of well-sculpted DC Direct figures at a few local "comic book stores." All are gone now. TRU won't be missed by me, but the nostalgic memories of the brick & mortar stores will remain.

  8. Joe Moore's Avatar Joe Moore says

    09-19-2017, 11:03 AM

    Did anyone actually read any of the articles on this? They aren't going out of business. This isn't a liquidation or even an organizational restructuring. Store sales have nothing to do with this filing. They're restructuring debt that was due. Stores are actually making money, but can't cover the large amount of debt, $400 million of which was due this year. So they filed for protection while they're restructuring the payments on these. They've already secured $3 billion in financing.

    Bankruptcy doesn't automatically mean you lose all you money and assets. Some low profit stores may be forced to close at some point in the future (pure speculation on my part), but that will all be dependent on what the final terms of the restructuring are. There's no clearance sales happening. Read beyond the headlines.

  9. VashTS has no avatar! VashTS says

    09-19-2017, 12:08 PM

    Quote:
    Originally Posted by Joe Moore View Post
    Did anyone actually read any of the articles on this? They aren't going out of business. This isn't a liquidation or even an organizational restructuring. Store sales have nothing to do with this filing. They're restructuring debt that was due. Stores are actually making money, but can't cover the large amount of debt, $400 million of which was due this year. So they filed for protection while they're restructuring the payments on these. They've already secured $3 billion in financing.

    Bankruptcy doesn't automatically mean you lose all you money and assets. Some low profit stores may be forced to close at some point in the future (pure speculation on my part), but that will all be dependent on what the final terms of the restructuring are. There's no clearance sales happening. Read beyond the headlines.
    From what I understood, the BabiesRUs is the problem. TRU seems to be doing fine, but the babies R us is a big money loser for them bc of Amazon.

  10. Joe Moore's Avatar Joe Moore says

    09-19-2017, 01:43 PM

    Quote:
    Originally Posted by VashTS View Post
    From what I understood, the BabiesRUs is the problem. TRU seems to be doing fine, but the babies R us is a big money loser for them bc of Amazon.
    That's a problem of its own, yes. The Chapter 11 filing was largely based on them owing $400 million in the coming year, and $7+ billion in debt (against $6+ billion in assets) over the coming years. That wasn't a far enough gap to consider liquidation, as an extension and restructuring of payments could see them out of it.

    They definitely need to rethink how they operate once this clears up. They don't carry enough other high profit items to become a loss leader (as Walmart and Target do). They also sit on enormous amounts of inventory of saturated product types (remote control cars, dolls, sports equipment, art supplies, etc.). The business side won't come out of this unscathed, but it's not like they're in danger of closing up the retail business any time soon.

  11. Zorn88's Avatar Zorn88 says

    09-19-2017, 04:02 PM

    I'm not surprised by this at all. In fact I'm surprised it hasn't happened sooner.

    The simple fact that they charge more for practically every item in their store compared to other retailers deters me from buying there. I only buy exclusive items there, only because I have no other choice, obviously. They are also terrible at stocking product, so I hope that this bankruptcy opens their eyes and forces them to make operational changes.

  12. Augustus_Cole's Avatar Augustus_Cole says

    09-19-2017, 04:38 PM

    i say again...that times square store that closed the end of 2015 was a site to see....i was sorry to see that go.
    I remember the day i was in there and found out, I said to a female worker..."REALLY...you are closing, this store stays packed". her response was, "yeah, but that doesn't mean they are spending money"

  13. Thor Laserpunch has no avatar! Thor Laserpunch says

    09-19-2017, 05:26 PM

    Oh noes, where will everyone go to stare at the same pegwarmers for months now?

    The Toys R Us 70 minutes away.

  14. Jeddostotle7's Avatar Jeddostotle7 says

    09-19-2017, 05:32 PM

    Quote:
    Originally Posted by Zorn88 View Post
    I'm not surprised by this at all. In fact I'm surprised it hasn't happened sooner.

    The simple fact that they charge more for practically every item in their store compared to other retailers deters me from buying there. I only buy exclusive items there, only because I have no other choice, obviously. They are also terrible at stocking product, so I hope that this bankruptcy opens their eyes and forces them to make operational changes.
    As you'd probably know if you actually read the article OR any of the other posts in this thread, this is NOT about how much business their stores are getting or how much stuff they're selling. This is all about internal handling of their debt.

  15. Zorn88's Avatar Zorn88 says

    09-19-2017, 08:54 PM

    Quote:
    Originally Posted by Jeddostotle7 View Post
    As you'd probably know if you actually read the article OR any of the other posts in this thread, this is NOT about how much business their stores are getting or how much stuff they're selling. This is all about internal handling of their debt.
    Hahaha.

    How do you think they got their debt?

    They probably got their debt because they can't keep their toys on the shelf, right?

  16. Jeddostotle7's Avatar Jeddostotle7 says

    09-19-2017, 10:34 PM

    Quote:
    Originally Posted by Zorn88 View Post
    Hahaha.

    How do you think they got their debt?

    They probably got their debt because they can't keep their toys on the shelf, right?

    They got their debt because of mismanagement. Again, read the article, or read Joe Moore's messages. This isn't because they just can't sell product or something. It's much more complicated than that.

  17. Joe Moore's Avatar Joe Moore says

    09-20-2017, 05:06 AM

    Quote:
    Originally Posted by Zorn88 View Post
    The simple fact that they charge more for practically every item in their store compared to other retailers deters me from buying there.
    The reason retailers like Walmart and Target can charge less for toys is that they prefer to be loss leaders in that space. The profit margin for many mainstream toy lines is small in comparison to the other items those places sell. Their goal is to sell toys at reduced prices, not caring if they make a profit, in the hopes that shoppers will avoid the competition and also pick up other items that offer greater profit to them. Items like clothes, furniture, beauty products, home goods.

    Unfortunately, a store like Toys R Us doesn't offer those higher profit margin items to spread out the cost like the bigger box stores do. They try to offset those mark downs by selling items those places don't and offering as many exclusives as they can.

    Most of the current debt isn't from lagging sales, but from the holdover debt from the leveraged buyout in 2005 by Bain Capital, KKR and Vornado Realty Trust. They loaded the company up with debt so they could take it private, but that resulted in massive interest payments each year since. This is completely their own doing, of course, but has far less to do with day-to-day sales than the general public thinks. Yes, competition is fierce from their rivals, and it is eating into their bottom line, but that's not the root cause in this instance.

  18. jestermon has no avatar! jestermon says

    09-23-2017, 07:25 PM

    Every time I go they always have workers just standing around.

  19. MeLikeJinx has no avatar! MeLikeJinx says

    09-23-2017, 07:42 PM

    My TRU always raises the price on hot exclusive items when the 2nd shipment arrives. Like for newest 2 pack Joes... they were regular price when they first hit, but then the next time they would be 4 or 5 dollars more in store... then you would have to ask for a price adjustment to match the website, but that's only if they were in stock online... if not you had to buy them at the new more expensive price.

  20. Augustus_Cole's Avatar Augustus_Cole says

    09-24-2017, 01:19 AM

    1. i thought this thread was closed.

    2. there is a new toys r us in times square. 3 levels. BUT, it may only be until after the Christmas Season.

  21. LordMudd has no avatar! LordMudd says

    09-24-2017, 08:07 AM

    Here is an interesting article currently on MSN.


    Why neighborhood toy stores are thriving while Toys R Us goes bankrupt


    CCC.

  22. RKillian's Avatar RKillian says

    09-25-2017, 08:58 PM

    Quote:
    Originally Posted by LordMudd View Post
    Why neighborhood toy stores are thriving while Toys R Us goes bankrupt
    Why can't every Toys R Us have a wealthy town built around it just like the ones in these people's bubbles?

    Between these yuppies and the b-b-but-walmart-is-six-cents-cheaper crowd, no wonder it's feast or famine.

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