Toys "R" Us files for bankruptcy as holiday season approaches

Toys R Us Files for Chapter 11 Bankruptcy

The chain could have avoided bankruptcy for another two years but "it would have delayed the inevitable", according to Tuesday court testimony by David Kurtz of Lazard, an investment bank advising Toys "R" Us.

The bankruptcy filing comes just ahead of the holiday season, the busiest time for the year for Toys "R" Us.

Dave Brandon, the company's chief executive, emphasised that shops would carry on operating as usual and claimed that the best era of Toys "R" Us was still to come.

Here's what it means to be the largest specialty toy and baby goods retailer in the United States in 2017: 866 stores nationwide, Chapter 11 bankruptcy, and getting dominated online by Amazon.

In North America, when a company seeks creditor protection, suppliers are required to continue supplying goods without collecting on owed balances.

BBC reported that a U.S. bankruptcy judge approved a loan of more than $2bn to help stabilise the toy chain so that Toys "R" Us would have time and money to prepare for the upcoming Christmas shopping season. For children of the 1980s, Toys "R" Us was a mecca at the strip mall, an awe-inspiring array of dolls, trucks, board games, bikes, art supplies and much more.

They're not alone. Many brick and mortar stores have struggled, or simply given up, and industry analysts see a trend.

Toys "R" Us joins a list of hundreds of companies that have succumbed to the online threat and filed for bankruptcy protection this year.

However, Toys R Us has been slow to embrace online sales, particularly after a partnership with Amazon dissolved earlier in this decade.

The company has received a commitment for over three billion US dollars in debtor-in-possession financing from various lenders, including a JP Morgan-led bank syndicate and certain of the Company's existing lenders.

There were 1,600 stores in 38 countries.

Meanwhile, credit ratings of Toys "R" Us took a beating as rating agencies lowered their ratings as a result of the bankruptcy filing.

As Toys " R " Us Canada continues to position itself for the future, the Company is also extending the successful customer-centric store format that opened in Langley, British Columbia in July 2017 to a new store in South Barrie, Ontario that will open in November 2017. Forbes reports the company has been "overleveraged" since 2005, when it went private in a buyout.

The last ten years have been a bonfire for retailers on both sides of the Atlantic as consumer shopping habits have changed and the popularity of big box out of town retail stores has declined. If Toys "R" Us can emerge from bankruptcy with less debt plus money to reinvest in its business, the process could mark a turning point.

"Vendors have cut them off based upon the rumours of the filing which has not been refuted", said Jay Indyke, a bankruptcy attorney with the Cooley law firm. Sales of fidget spinners, a toy that has become ubiquitous in the past year, got twirling online first.

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