Toys “R” Us Winds Down U.S. Business, Will Liquidate 735 Stores
Boston, March 15, 2018 — Toys “R” Us filed a motion seeking bankruptcy court approval to begin the process of conducting an orderly wind-down of its U.S. business and liquidation of inventory in all 735 of the company’s U.S. stores, including stores in Puerto Rico. Toys “R” Us will provide more details about the plans for the liquidation of its U.S. stores and going out of business sales in the near term.
Toys “R” Us also announced it is pursuing a going concern reorganization and a sale process for its Canadian and international operations in Asia and Central Europe, including Germany, Austria and Switzerland. The company’s international operations in Australia, France, Poland, Portugal and Spain are considering their options in light of this announcement, including potential sale processes in their respective markets. The company’s stores in all these international markets are currently open.
In connection with the sale process, the motion the company filed with the bankruptcy court included bidding procedures for the Canadian operations. The company also disclosed that it is engaged in discussions with certain interested parties for a transaction that could combine up to 200 of the top performing U.S. stores with its Canadian operations. While discussions continue on this potential transaction, Toys “R” Us is seeking court approval to implement the liquidation of inventory in all the U.S. stores, subject to a right to recall any stores included in the proposed Canadian transaction.
The news comes after the toy retailer’s failed attempt to reorganize after filing for Chapter 11 protection in September and receiving a $3.1 billion debtor-in-possession facility led by JPMorgan as administrative agent.
In September, Bloomberg reported that Bain Capital, KKR and Vornado Realty Trust had much at stake after they purchased Toys “R” Us in 2005 for $7.5 billion, funneling $1.3 billion of equity into the ailing company.
According to a report from CNBC, the three co-owners financed the rest of the purchase process with $4.9 billion in debt, including senior loans in which they had an interest.
Toys “R” Us was already in the process of shuttering 180 stores, in a liquidation conducted by Tiger Capital Group, Great American Group, Gordon Brothers Retail Partners and Hilco Resources.
Dave Brandon, chairman and CEO, said, “I am very disappointed with the result, but we no longer have the financial support to continue the company’s U.S. operations. We are therefore implementing an orderly process to shutter our U.S. operations and will pursue going concern sales or reorganizations of certain of our international businesses, while our other international businesses consider their options.”
Brandon continued, “There are many people and organizations who have remained in our corner every step along the way. I want to thank our extraordinary team members who helped build Toys “R” Us into a global brand. I also want to express my appreciation for my colleagues on our board who have continued to provide support to sustain the brand and our operations throughout the restructuring process. I would also like to thank our vendors who we owe a great deal of gratitude to for their decades of support. This is a profoundly sad day for us as well as the millions of kids and families who we have served for the past 70 years.”
The company and its advisors are working to minimize the impact of the U.S. liquidation on the Canadian and other international markets. As part of these efforts, the company is implementing a transition services arrangement for the next 60 days and is developing plans for a potential shared service function to support the international operations going forward.
Kirkland & Ellis is serving as principal legal counsel to Toys “R” Us, while Alvarez & Marsal is serving as restructuring advisor and Lazard as financial advisor.
To locate a nearby store, visit www.toysrusclosingsale.com.
