Toys R Us, faced with deadlines to pay off hundreds of millions in debt, yesterday said, that it has filed for Chapter 11 bankruptcy protection. (See: Toys 'R' Us preparing for possible bankruptcy filing: Reports)
Toys R Us said in a statement, "the company and certain of its US subsidiaries and its Canadian subsidiary have voluntarily filed for relief under Chapter 11 of the Bankruptcy Code in the US Bankruptcy Court for the Eastern District of Virginia in Richmond, VA."
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 move comes as the all-important holiday season is about to open. Retailers earn about half of their annual revenue in the period, which is also especially lucrative for the giant toy seller. According to commentators, the filing was long in the making.
The filing also sees one the most iconic retailers in the US, a household name for more than a generation, wilt in the face of competition from online retailers. Toys R Us ushered in big-box toy retailing generations ago, creating a national chain that displaced many smaller, neighbourhood toy stores.
Toys R Us said that it will continue to work with suppliers to ensure adequate stocks of games, gadgets, and other toys.
The filing was made in the US Bankruptcy Court for the Eastern District in Richmond, Virginia. A similar petition is planned by its Canadian subsidiary in Ontario Superior Court.
According to commentators, debts at the company have been heavy after it became a private company in 2005. Private equity investors, KKR, Bain Capital, and Vornado Realty Trust, initially planned to earn back their investment with a public stock offering, but the Great Recession put paid to that plan.
''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,'' Dave Brandon, the company's CEO said in a statement.
Brandon joined the board as chief executive in 2015 to bring about a turnaround that aimed to prepare the company for either another attempt to go public or a sale. The company, which acknowledged being overtaken by peers, also revamped its website this summer. But success has eluded the company, which now trails Walmart, the biggest toy seller in the US. Shoppers also have online options when browsing for gadgets and games.
The toy store chain's long-term debt was $5 billion as of April 29. It had $701 million in liquidity, which included $400 million in committed lines of credit.
To facilitate its restructuring, a group led by JP Morgan, along with other lenders will give Toys R Us more than $3 billion in financing.
"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,'' the company said.