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Toys R Us hires law firm as it contemplates filing for bankruptcy

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https://www.cnbc.com/2017/09/06/toys-r-us-weighs-possible-bankruptcy-filing.html

Toys R Us has hired a law firm to help restructure its roughly $400 million in debt due in 2018, a move that could include the marquee toy store filing for bankruptcy, sources familiar with the situation said Wednesday.

Addressing the retailer's debt load prior to the crucial holiday season could give its major vendors such as Mattel and Hasbro clarity into the company's long-term viability to help ensure the toymakers continue to stock its shelves throughout the holidays.

Toys R Us has hired restructuring lawyers at Kirkland & Ellis to help address the looming payments, the people said.

 

Hiring a law firm like Kirkland is not indicative of a bankruptcy filing, and many companies work with law firms to successfully refinance or restructure their debt without filing for protection.

The company has already announced it is working with Lazard to help address its debt load, and it successfully refinanced some of its debt just a year ago. Still, it has become increasingly difficult for leveraged retailers to tap the refinancing market, as lenders have become spooked by the increasing number of retail bankruptcies.

"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 in a statement.

"We expect to provide an update about these activities, as well as the many initiatives underway to provide an outstanding customer experience in our global retail locations and webstore during the holiday season, during our second quarter earnings call."

Toys R Us will have its second quarter earnings call on Tuesday, September 26.

Toys R Us owners Kohlberg Kravis Roberts, Bain Capital Partners and Vornado Realty Trust either declined to comment or did not immediately have a comment. Kirkland also did not immediately have a comment.

The potential restructuring comes amid increased competition from both brick-and-mortar and online players. Big box stores such as Wal-Mart have for years driven down prices of toys to draw parents into their stores to buy other more expensive goods. E-commerce giant Amazon.com has become an increasingly formidable competitor.

Toys R Us' baby-centered store, Babies R Us, meanwhile, has seen diaper sales fall as parents increasingly buy diapers through online subscription businesses offered by Amazon and other e-retailers.

Wayne, New Jersey-based Toys R Us blamed intense promotional activity and slowing baby business sales for its disappointing 2016 holiday results. The company, which relies heavily on holiday purchases to support its year-round business, saw same-store sales drop 3.4 percent from its last holiday season.

The weaknesses have carried into the spring, with the company reporting in June a net loss of $164 million in the first quarter of 2017, up from $126 million the previous year. Its same-store sales dropped 4.1 percent.

Toys R Us had roughly $301 million cash on its balance sheet as of April 29.

Toys R Us has sought to address its challenges under the guidance of CEO Dave Brandon by expanding in Asia and investing in a new website and baby registry. It has also been downsizing its real estate footprint, including closing its Times Square flagship in 2015.

The retailer announced in August that it will be opening a 35,000-square-foot temporary shop in the historic Knickerbocker Building for the holiday season. The retailer has an option to renew the lease to extend its stay, a source familiar with the situation said.

Toys R Us was taken private by KKR, Bain and Vornado in 2005 in a deal valued at $6.6 billion.

Its owners had tried to take the company public, filing for an initial public offering in 2010, but later pulled it, citing challenging market conditions. At that time, the toy industry was struggling to deal with the increasing popularity of electronic gaming apps. 

A restructuring could help Toys R Us simplify a capital structure made complex by its trio of owners and get out of expensive leases. It would follow on the heels of several private equity-backed retailers that have filed for protection to tackle over-sized store footprints and debt-loads.

Golden Gate Capital-backed Payless ShoeSource for example recently emerged from bankruptcy after shuttering roughly 700 stores across the U.S. with goals to grow in Latin America.

Bain-backed Gymboree is closing roughly 350 stores in bankruptcy, in hopes of re-emerging with only its most lucrative stores.

Edited by youbastards

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Mirymate   

Curse? No. Death by Amazon far more likely.

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Agreed.  I really thought TRU was doing the right thing by ramping up a supportive web presence to solidify their brick and mortar presence.  However, both continue to have problems.

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MisterPL   

The Walking Dead, Series 5.

 

That's when it started going downhill. Then they skipped Series 6 entirely and followed it up with Series 7 with Ezekiel, a Mauled Zombie, but no tiger.

 

This is what happens when you don't include tigers. Chaos.

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On 9/7/2017 at 8:53 AM, Mirymate said:

Curse? No. Death by Amazon far more likely.

Agreed. Also Bankruptcy isn't always a death sentence. Look at Marvel. It depends on what the plan is to go forward. 

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The kind of bankruptcy they are likely looking at is debt protection. It allows them to keep getting product, and prevents suppliers from collecting older debt while they attempt to restructure their debt through financing.  Its basically the court coming in to keep creditors at bay for a time while they figure out what to do. It in no way means they are going out of business, but you can probably expect under performing stores to close as they work through it. Companies emerge from bankruptcy protection all the time. Others switch from protection to liquidation. Just depends on how successful they are at refinancing and restructuring.

And they could refinance their debt without bankruptcy protection. My company has done work in this field so its certainly possible this is just a temporary situation. If they have a solid plan.

Edited by Mysterious Stranger

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I wouldn't worry to much about ToysRUs.........most countries ,including my own ,are technically bankrupt .  

The question that you'll rarely get a straight answer to is " who do 'we' owe the money to ?"

 

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Onyx_6   
7 hours ago, buttheadsmate said:

I wouldn't worry to much about ToysRUs.........most countries ,including my own ,are technically bankrupt .  

The question that you'll rarely get a straight answer to is " who do 'we' owe the money to ?"

 

"To whom do 'we' owe the money?" Since we had talked about this before. 😉

And I am pretty sure the US is in the same boat as far as owing money....

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14 hours ago, Mysterious Stranger said:

The kind of bankruptcy they are likely looking at is debt protection. It allows them to keep getting product, and prevents suppliers from collecting older debt while they attempt to restructure their debt through financing.  Its basically the court coming in to keep creditors at bay for a time while they figure out what to do. It in no way means they are going out of business, but you can probably expect under performing stores to close as they work through it. Companies emerge from bankruptcy protection all the time. Others switch from protection to liquidation. Just depends on how successful they are at refinancing and restructuring.

And they could refinance their debt without bankruptcy protection. My company has done work in this field so its certainly possible this is just a temporary situation. If they have a solid plan.

This is pretty much spot on (I work in finance).

I'm pulling for TRU. They will always hold a special place in my heart. My TRU always has a full parking lot so if they start closing down stores hopefully mine will survive.

There's a lot of things they can do on the macro and micro level to improve and I hope they do. A world without a toy specific  (KayBee and FAO don't exist anymore) store is depressing.

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On ‎9‎/‎8‎/‎2017 at 3:17 PM, thereasonsy said:

Agreed. Also Bankruptcy isn't always a death sentence. Look at Marvel. It depends on what the plan is to go forward. 

So... Sell TRU to Disney. Got it.

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Nessex   
7 hours ago, Trekker 42 said:

So... Sell TRU to Disney. Got it.

And restrict the appearance of any X-Men of Fantastic 4 merchandise, then forbid the appearance of characters from those franchises in any general Marvel products/games/books sold via TRU. 
Got it.

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17 minutes ago, Nessex said:

And restrict the appearance of any X-Men of Fantastic 4 merchandise, then forbid the appearance of characters from those franchises in any general Marvel products/games/books sold via TRU. 
Got it.

If it means I have to track down greatest hits F4 mates in exchange for getting at least 25-33% more minimates because TRU survives I'll gladly take that trade off. It's not like there's an abundance of new good books at marvel in general the only ones I pickup are ASM and Ben Reilly so I don't even feel like I'm missing out on F4 comics either. 

Edited by The Scarlet Spider

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On 9/10/2017 at 9:08 PM, The Scarlet Spider said:

If it means I have to track down greatest hits F4 mates in exchange for getting at least 25-33% more minimates because TRU survives I'll gladly take that trade off. It's not like there's an abundance of new good books at marvel in general the only ones I pickup are ASM and Ben Reilly so I don't even feel like I'm missing out on F4 comics either. 

What about X-Men? TRU isn't a bookstore/comicshop.

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1 hour ago, Gmonkey2k said:

What about X-Men? TRU isn't a bookstore/comicshop.

For one Disney already owns Marvel and we still have been getting X-Men. We've got been getting a ton of X-Men mates lately. I was just saying for me keeping a huge retailer that we know gets us more minimates and one or two branches of the marvel tree I'm going with what gets us more minimates as a whole. 

I also included the comics thing because It kind of fit since I don't miss F4 in the current landscape of comics all that much due to the quality of the comics nowadays. As well as the fact that I'm not looking for any of those newer characters as mates. If we never get a wolverine-hulk or blonderine from the new weapon X or X-Men comics I'd be just fine (Even though I know we'd probably get those 2 mates that before we get a Harry Osbourne or another Blade mate :turned:) I mean we still barely have any mates of X-23 it feels like. Maybe 3?

Edited by The Scarlet Spider

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DSTZach   

Three X-23s is barely any? We've made most of her looks except her brief Young X-Men outfit. Well, and her new one. And I guess she wore the Fang costume for a while.

Edited by DSTZach

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We've definetly had some good X-23 Minimates. Not so many compared to Spider-Man or Wolverine proper, but it's still a lot more that we've had of more mainstream characters like, say, Rocket Raccoon. All three looks we've gotten have been solid figures, too. 

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I got my ideal X-23 with the first one, and the foot claws with the second, so anything beyond that is bonus for me, and good for anyone else who wants something else.

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MisterPL   
5 minutes ago, BuffaloDelorean said:

I'd like to get All-New X-Men X-23 to conplete that team, but it seems pretty unlikely.

 

:ditto:

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Does filing for bankruptcy really mean anything in the corporate world anymore aside from "we don't feel like paying our bills?" Seems like the social stigma is no longer relevant, and investment firms seem to like the prospects of companies with a lot of assets and a clean balance sheet. 

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Depends on which type of bankruptcy you file for....the one they've filed for is not the "big clearance all stores closing fire sale" type.   Yet.

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31 minutes ago, JediJohnson said:

Depends on which type of bankruptcy you file for....the one they've filed for is not the "big clearance all stores closing fire sale" type.   Yet.

Yeah they didn't pull a Borders. This seems more... early K-Mart. 

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The reorganization success rate coming out of chapter eleven is only about 10% but they will at least buy themselves time. They say they won't be closing stores but I have no idea how that works in any form of reality. I would expect at least 50 US stores closings announced within a year. Foreign sales have been down too but I'm not as familiar with that aspect of their operations. I don't think TRU is alone here, retail in general feels like the next dot com bubble.

They're going to have to re-evaluate their relationships with their vendors.

They're going to have to completely overhaul how they approach online retail. Not just "I can't order the Minimates I want" but a ground-up restructuring of how they approach inventory in general.

I wouldn't be surprised to see them merger with someone who wants a bigger presence in baby furniture. Like.....Walmart?  

4th quarter will be interesting for obvious reasons. That's going to be make it or break it time and we'll have a much better picture of their future at that time.

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