[Updated: Toys“R”Us (Asia)’s comment on the news]
Toys”R”Us has filed for chapter 11 bankruptcy protection for a certain of its U.S. and Canadian subsidiary to restructure the nearly US$5 billion that it has in debt, the company announced.
It has received a commitment of over US$3 billion in debtor-in-possession financing from various lenders, including a JPMorgan-led bank syndicate, to support operations.
The company is also intending to seek protection in parallel proceedings under the Companies’ Creditors Arrangement Act(CCAA).
Toys”R”Us’ operations outside of the U.S. and Canada, including its approximately 255 licensed stores and joint venture partnership in Asia, which are separate entities, are not part of the Chapter 11 filing and CCAA proceedings.
In a press release, Toys“R”Us (Asia) Ltd said it is a joint venture owned approximately 85% by Toys“R”Us Inc. and 15% by Fung Retailing Ltd (a privately-held entity and member of the Fung Group). It operates as a separate legal entity and is financially independent from all other Toys“R”Us operating companies around the world.
Andre Javes, President, Toys“R”Us (Asia) Ltd, reaffirmed, “Toys“R”Us (Asia) is open for business and continuing to serve our customers as we always do. We are a financially robust and self-funding retail operation, which continues to significantly grow and invest in this region. Every year we are opening new stores in all our markets and particularly in China where we now operate over 135 stores and will be opening another 22 in the coming weeks.”
On the other hand, Dave Brandon, Toys”R”Us’ chairman and chief executive officer, said today marks the dawn of a new era at Toys”R”Us where they expect that the financial constraints that have held them back will be addressed in a lasting and effective way.
“Together with our investors, our objective is to work with our debtholders and other creditors to restructure the $5 billion of long-term debt on our balance sheet, which will provide us with greater financial flexibility to invest in our business, continue to improve the customer experience in our physical stores and online, and strengthen our competitive position in an increasingly challenging and rapidly changing retail marketplace worldwide.”
The company has approximately 1,600 Toys”R”Us and Babies”R”Us stores around the world. “The vast majority of which are profitable” will continue to operate as usual, it said in the release.
Consolidated net sales for Toys “R” Us in the first quarter of 2017 were US$2,206 million, a US$113 million decrease compared to the same period in 2016. There was a 6.2% decline in domestic business, while international sales dipped by 0.6% due to weaker sales in Europe, and was partially offset by growth in Asia Pacific.
(Read more: Bankruptcy possibly on the cards for Toys “R” Us)