Beleaguered toy retailer Toys R Us is in the midst of prepping plans to liquidate its U.S. operations, currently in bankruptcy, according to recent Bloomberg reports. The plans come as the company has yet — and the emphasis may be on “yet” — to find a buyer for those operations or finalize its debt restructuring plans.
Toys R Us' situation is in flux, but reports say liquidation seems a likelihood amid dashed hopes that a buyer will come to keep the (toy) trains running, so to speak, or that the debt will be repackaged.
As has been widely reported, the U.S. toy and game brand entered bankruptcy protection in September 2017, and had planned to refashion both its capital and operating structures — which is typical of such strategies. Toys R Us managed to garner a $3.1 billion loan at the time to keep stores open, but holiday shopping results were worse than expected, and concerns emerged about the company’s ability to operate as a result.
Overseas operations are also hampered, reports have noted, with the company’s U.K. operations under the jurisdiction of a court administrator as efforts to sell that unit came to naught.
The current situation stems from a leveraged buyout of the Toys R Us brand way back in 2005, a move that saw alternative investment firm Bain Capital, global investment firm Kohlberg Kravis Roberts (KKR) and real estate investment firm Vornado Realty Trust heaping debt on the company. Refinancing remained a viable strategy for a while, but then came the Amazon effect. As online sales grew, Toys R Us was forced to grapple with the fact that investment dollars — funding that could have been slated for online onslaughts of its own — were scarce.
The loss of the marquee name will hurt the industry, Bloomberg said, noting that Toys R Us represents approximately 15 percent of total revenue in the arena.