Toys”R”Us restructures under Chapter 11

November 2017  |  DEALFRONT |  BANKRUPTCY & CORPORATE RESTRUCTURING

Financier Worldwide Magazine

November 2017 Issue


The latest victim in a retail industry impacted by online shopping and discount chains, debt-ridden national toy chain Toys”R”Us, Inc. and certain of its US subsidiaries and its Canadian subsidiary, have voluntarily filed for relief under Chapter 11 of the US Bankruptcy Code.

In parallel proceedings, the company’s Canadian subsidiary is seeking protection under the Companies’ Creditors Arrangement Act (CCAA) in the Ontario Superior Court of Justice. Toys”R”Us 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 initiatives.

In conjunction with the Chapter 11 process in the US, Toys”R”Us has filed a number of customary motions with the Bankruptcy Court for the Eastern District of Virginia seeking authorisation to support its operations during the restructuring process and ensure a smooth transition into Chapter 11 without disruption. These include authorising the continued payment of employee wages and benefits, honouring customer programmes, and paying vendors and suppliers in the ordinary course for all goods provided on or after the filing date.

In addition, the company has received a commitment for over $3bn in debtor-in-possession (DIP) financing from various lenders, including a JPMorgan-led bank syndicate and certain existing lenders, which, subject to court approval, is expected to immediately improve the financial health of Toys”R”Us and support its ongoing operations during the court-supervised process.

The company’s operations outside of the US and Canada, including its approximately 255 licensed stores and joint venture partnership in Asia, which are separate entities, are not part of the Chapter 11 filing and CCAA proceedings.

“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, chairman and chief executive. “Together with our investors, our objective is to work with our debtholders and other creditors to restructure the $5bn of long-term debt on our balance sheet, which will provide us with greater financial flexibility to invest in our business, continue to improve the customer experience in our physical stores and online, and strengthen our competitive position in an increasingly challenging and rapidly changing retail marketplace worldwide. 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.”

Headquartered in Wayne, New Jersey, Toys”R”Us is the world’s leading dedicated toy and baby products retailer, with nearly 65,000 employees worldwide. The company sells merchandise in 885 Toys”R”Us and Babies”R”Us stores in the US, Puerto Rico and Guam, and in more than 810 international stores and over 255 licensed stores in 38 countries and jurisdictions.

“As the holiday season ramps up, our physical and web stores are open for business, and our team members around the world look forward to continuing to put huge smiles on children’s faces,” continued Mr Brandon. “We thank our vendors for their ongoing support through this important season and beyond. We also thank our team members in advance for their hard work and dedication to serving the millions of customers who will shop with us this holiday.”

Serving as principal legal counsel to Toys”R”Us is Kirkland & Ellis LLP, while Alvarez & Marsal is serving as restructuring adviser and Lazard is serving as financial adviser.

Mr Brandon concluded: “We appreciate the strong support our investors have provided over time and the constructive role they are playing in this process that will allow us to create a brighter future for our company.”

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BY

Fraser Tennant


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