Retail

Toys R Us Will Create $156M Vendor Fund

Toys R Us

To pay vendors for merchandise shipped after its bankruptcy filing in September, a lawyer for Toys R Us said the embattled retailer will create a $156 million fund. But lawyers representing the retailer’s vendors said that amount doesn’t cover the $760 million in trade claims, CNBC reported.

Some vendors thought their shipments would be paid through a $3.1 billion bankruptcy loan, but lenders and legal fees have priority for those funds.

“It’s a really hard pill to swallow,” Erika Morabito, a lawyer for a group of trade vendors, said at a U.S. Bankruptcy Court hearing. Morabito said that despite employee layoffs and store closures, vendors are in a “dire” situation. If vendors don’t receive a larger settlement, Morabito said the group, along with other vendors, may seek litigation “against the persons or entities responsible for the severe losses suffered.”

The news comes as lawyers and advisers for Toys R Us have reportedly turned down a last-minute bid for the retailer’s U.S. stores from MGA Entertainment Founder Isaac Larian because his offer didn’t meet the threshold set by the court, according to a person familiar with the matter.

Larian had made an offer of $675 million for the Toys R Us stores in the U.S. In addition, he bid $215 million for the retailer’s operations in Canada. Advisers and lawyers for Toys R Us were still reportedly looking at offers for the retailer’s business in Canada when news of the bid surfaced on Thursday (April 19).

The retailer has over 700 remaining locations in the U.S., including those under the Babies R Us banner. If completed, the company’s liquidation would be among the largest in retail history since Sports Authority closed nearly 500 stores, The Wall Street Journal reported. Since a leveraged buyout, Toys R Us has been burdened with over $5 billion in debt. Competition from eCommerce retailers such as Amazon and discount stores such as Walmart hasn’t helped the company either.

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