Toys R Us, The Wonderland For Kids is in Deep Trouble as it Plans to File for Bankruptcy

Every child’s favorite place, and every parent’s worse nightmare is in some serious trouble, as it struggles with keeping itself afloat.

Toys R Us is currently sinking in $400 million worth of debt, and is frantically seeking for someone to toss it a life jacket. The retailer, popular for its selling of children toys, has hired law firm, Kirkland & Ellis, to help it file for bankruptcy.

With legal aide, it hopes to analyze and come up with solutions to reorganize the retailers $400 million debt, which is due in the upcoming year according to CNBC.

The law firm hired by Toys R Us specializes in the reorganization of a company in order to increase profit, and adapt to a changing market. Such restructuring methods include the Chapter 11bankruptcy protection filings. Chapter 11 fillings are a common course of action companies take to restructure their debt, to clean up a company’s balance sheet.

Neil Saunders, Managing Director of GlobalData Retail said:

 “While the decision of Toys R Us to appoint restructuring advisors is not necessarily a sign that bankruptcy is imminent, it is an indication that the company is in a very uncomfortable financial position.”

Toys R Us has claimed to have started working with investment bank Lazard, in order to deal with it’s debt load, and began refinancing last year. But with declining sales, and more news of retailers filing for bankruptcy, finding financing is a difficult task.

In an emailed statement Toys R Us spokeswoman Amy von Walter told Fortune states:

“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.”

She adds that the company will provide updates, and it’s strategy of how it will perform well during the upcoming holiday season. During the companies next earnings conference call in late September, these matters are expected to be addressed.

Toys R Us is currently owned by two private equity firms Kohlberg Kravis Roberts and Bain Capital Partners as well as commercial real estate company Vornado Realty Trust. But the retailer is not the only private-quite owned retailer that is currently struggling with falling sales, and ski rocketing debt. Companies such as J.Crew and Neiman Marcus are also struggling with the same issues as the toy retailer. Other companies such as Payless ShoeSource and Gymbore have attempted at gaining the Chapter 11 protection this year, in order to reduce their company’s geographic market presence.

The owners of Toys R, who purchased the company back in 2005 for $6.6 billion, attempted in 2010 to take the company public, a plan which failed when the business faltered.

With the upcoming Christmas season coming closer, the company is believed to face some heavy competition. Apparently the retailer blames it’s competitors for it’s sales falling in 2016, due to their over promoting during the holiday season. So in other words, they’re upset that their competitors are trying to make a profit during the holiday season, just as they are. Sounds like a lot of whining and complaining from Toys R Us.

But the competition isn’t letting up even with the complaints made by Toys R Us. On Wednesday Walmart unveiled its 2017 holiday toy list, and has made it known that it will be making toys, it’s main selling point for the upcoming holidays.

“It suffers competition from online and physical generalists who happily discount toys to drive customer traffic and sales for stores and websites.” said GlobalData Retail’s Saunders. And with the holidays just around the corner, they can look forward to another competitive year.

[via Fortune]

You might also like