As expected the Toys ‘R’ Us chain has collapsed in the US, going into Chapter 11 bankruptcy protection on Monday night leaving the fate of hundreds of stores and 64,000 thousands of employees around the world up in the air.
The company’s Canadian operations are seeking bankruptcy protection in that country, but so far there’s been no sign of a similar move in Australia to protect the 42 stores.
Toys R Us stores in Australia will continue to operate as normal.
The retailer’s said in the statement its operations outside of the United States and Canada, including about 255 licensed stores and joint venture partnerships in Asia, are separate entities and not part of the Chapter 11 filing and Canadian proceedings.
The shares of Mattel, one of the biggest toymakers in the world (Barbie, Fisher Price, Hot Wheels) fell more than 6% on Monday as news of Toys “R” Us’s problems spread. Shares in Hasbro, another toy group fell 1.7%.
Toys ‘R’ Us said it received a commitment for over $US3 billion in debtor-in-possession financing from lenders including a JPMorgan-led bank syndicate and certain of the company’s existing lenders.
The new financing, subject to court approval, is expected to immediately improve the company’s financial health and support its ongoing operations during the court-supervised process, Toys ‘R’ Us said.
The company’s Canadian unit intends to seek protection in parallel proceedings under the Companies’ Creditors Arrangement Act in the Ontario Superior Court of Justice, Toys ‘R’ Us said in the statement.
The bankruptcy filing is among the largest ever by a specialty retailer (with Payless Shoes’s filing earlier this year and huge collapse with debts that could reach $US10 billion).
It comes just as Toys ‘R’ Us is gearing up for the holiday shopping season, which accounts for the bulk of its sales (as it does for many other retailers).
Bloomberg reported that Toys “R” Us’s bonds were hammered on Monday in a massive sell off. Its 7.375% notes due 2018 traded for as little as 18 cents on the dollar during Monday’s session, according to the bond-price reporting system of the Financial Industry Regulatory Authority. That’s down from 97.25 cents on August 30.
