Toys “R” Us Prepares for Possible Bankruptcy Filing

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Toys “R” Us Inc could file for bankruptcy in the coming weeks as pressure from skittish suppliers intensifies, the Wall Street Journal reported on Friday, citing people familiar with the matter.

  • More than a dozen significant retail bankruptcies this year, none as big as Toys “R” Us
  • Suppliers holding back on shipments unless Toys “R” Us pay COD

The company and its restructuring advisers are considering filing for Chapter 11 protection in the US Bankruptcy Court in Richmond, Virginia, according to the WSJ report.

The privately-held toy retailer had previously said it was working with investment bank Lazard Ltd to help address its approximately US$5 billion in debt, of which roughly US$400 million comes due next year.

The potential Chapter 11 filing could be a result of the company’s suppliers tightening trade terms, including holding back on shipments unless the toy retailer is able to make cash payments on delivery, the newspaper reported.

Toys “R” Us declined to comment on the report.

The move by Toys “R” Us to potentially file for bankruptcy comes at a time when more and more consumers increasingly make purchases from online retailers like Inc and avoid visiting brick-and-mortar shops.

There have been more than a dozen significant retail bankruptcies this year, but none for retailers as big as Toys “R” Us, which has more than 1,600 stores worldwide.

Toys tapped restructuring attorneys from Kirkland & Ellis LLP, CNBC reported this month.

The company has been saddled with debt since buyout firms KKR & Co LP and Bain Capital LP, together with real estate investment trust Vornado Realty Trust, took Toys “R” Us private for US$6.6 billion in 2005.