Toys R Us lodges for insolvency ahead of holiday season

Toys R Us Files for Chapter 11 Bankruptcy

Here's what it means to be the largest specialty toy and baby goods retailer in the U.S. in 2017: 866 stores nationwide, Chapter 11 bankruptcy, and getting dominated online by Amazon.

If the bankruptcy restructuring can help Toys "R" Us get a handle on its debt, it's not insane to see a profit in sight. "The timing of all of this could not have been worse".

But it intends to make the best of the situation and reorganise in time to come back in force for the holiday shopping season, Bloomberg reported.

The Wayne, New Jersey-based company, which also operates the Babies "R" Us chain, can return to court to seek approval to borrow the entire loan commitment.

The Asian toy company's president, Mr Andre Javes, said: "We are a financially robust and self-funding retail operation, which continues to significantly grow and invest in this region".

Operations outside of the United States and Canada, including about 255 licenced stores and joint venture partnerships in Asia, which are separate entities, are not part of the bankruptcy proceedings, Toys "R" Us said. He said the company's board realized it should file now, raise significant cash and reverse years of underinvestment.

For now, stores aren't closing, although it remains unclear where the future lies for Toys "R" Us and gaming.

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Toys" R " Us (Asia) Ltd is a joint venture owned approximately 85 per cent by Toys" R " Us Inc. and 15 per cent by Fung Retailing Ltd (a privately-held entity and member of the Fung Group).

"It's the only showroom available". How is shopping in these kinds of stores different from shopping online?

"What Toys "R" Us has been doing is extending the debt as it comes due and paying higher interest rates", Howard Davidowitz, the head of the retail consultancy and investment bank Davidowitz & Associates, told CBS MoneyWatch earlier this month. Last year, Toys "R" Us accounted for 11 percent of sales at Mattel and 9 percent at Hasbro - the second most at both companies after Wal-Mart.

"The last thing I'm anxious about right now is the vendor support", he said.

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.

Toys "R" Us - once a dominant player in the American toy market - filed for bankruptcy protection Monday night with a crushing debt load that had turned the 1,600-store chain into an also-ran against larger rivals such as Amazon.com, Walmart and Target.

The firms UK, European and Australian operations aren't expected to be part of the bankruptcy proceedings at this time given that they remain profitable, however as we saw in the case of the closure of American Apparel's UK operations past year, after its parent company filed for Chapter 11, in 2015, that doesn't mean it may not happen at a later stage. Two other retailers-Payless ShoeSource, a 61-year-old discount shoe-seller from Kansas, and Gymboree, which began selling children's clothing in 1986-are among those that declared bankruptcy this year after being backed by private-equity firms that left them similarly weighed down.

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