Economy

Toys R Us explores possible bankruptcy to deal with debt

Toys R Us explores possible bankruptcy to deal with debt”

Toys "R" Us Inc has tapped lawyers at Kirkland & Ellis LLP to help restructure its heavy debt load, people familiar with the matter said, the latest sign of trouble for a once-mighty retailer that has struggled to fend off Amazon.com Inc and discount chains.

"As we previously discussed on our first quarter earnings call, Toys R Us is evaluating a range of alternatives to address our 2018 debt maturities, which may include the possibility of obtaining additional financing", Toys "R" Us spokeswoman Amy von Walter said. A spokesman for Kirkland & Ellis declined to comment. That, in his view, can largely be attributed to the company's private equity owners, Kohlberg Kravis Roberts, Bain Capital Partners and Vornado Realty Trust.

Toys R Us has almost 65,000 employees worldwide, with 885 Toys R Us and Babies R Us stores in the United States, Puerto Rico and Guam, and more than 810 global stores in 37 countries.

However, competition has been intense from the big box retailers such as Target and Walmart that have increased the number of toy offerings they have online and in stores.

Numerous traditional retailers continue to struggle against competitors like Amazon, but the debt load that Toys "R" Us is carrying has increased the pressure.

Toys R Us isn't an apparel retailer, but numerous problems facing the company look like those of apparel sellers going bankrupt this year. If Toys R Us files for reorganization, it would mean that creditors may have to take pennies on the dollar, and that isn't going to bode well for the payments that the toy manufacturers expect for their products.

The toy retailer has almost $5 billion worth of long-term debt, while at the same time has burned through large sums of cash as its sales continue to decline.

As of April 29, the company had $301 million in cash or cash equivalents, down from $458 million a year earlier, according to a quarterly securities filing in June.

Already this year, there has been a wave of retail bankruptcies, including children's clothing retailer Gymboree, Payless Shoesource and rue21, which sells teen clothing.



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