Richmond, Virginia. USA. Sept 18th. Toys “R” Us Inc. voluntarily filed for relief under Chapter 11 of bankruptcy code in bankruptcy court for eastern district of Virginia in Richmond late Monday night, undone by a hefty debt load in a buyout more than a decade ago, and failure to keep consumers from abandoning its stores for the lower prices and convenience of online shopping. Toys R Us has been working with lawyers at Kirkland & Ellis to help address $4.9 billion in debt, $400 million of which has interest payments due in 2018 and $1.7 billion of which is due in 2019. The bankruptcy comes ahead of the crucial holiday season, when the retailer does the majority of its sales. Toys R Us last year made 40% of its sales in the fourth quarter, thanks to holiday shopping.
The bankruptcy would help simplify a capital structure made complex by its trio of financial owners. Toys R Us was acquired by private equity firms Kohlberg Kravis Roberts and Bain Capital Partners and real estate investment trust Vornado Realty Trust in 2005 in a deal valued at $6.6 billion.
“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, the company’s chairman and CEO, said in a release announcing the filing.
“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,” he added.
Toys R Us has received commitment of over $3.0 billion in debtor-in-possession financing to support operations, the company said.
Photo: A Toys “R” Us store in New York City
Toys R Us is an anchor in a wobbling industry. Toymakers have come under pressure from cheaper off-shore imports, margin squeezing big-box retailers and children who increasingly prefer tablets to toys.
Toys R Us Inc – Canadian subsidiary intends to seek protection, under CCAA, in parallel proceedings under companies’ creditors arrangement act in Ontario superior court of justice