Toys "R" Us in negotiations to sell Canadian business

Toys

Although Toys R Us announced this morning that it plans to close or sell its 735 USA stores, Geoffrey the giraffe so far is roaming free in Central Pennsylvania, according to people contacted at the bankrupt chain's local stores.

Liquidating Toys "R" Us in the USA will lead to the largest layoff in the retail sector since at least 2015, and would be 12th-largest job cut announcement since 1993, trailing the 34,000 people who lost their jobs when Circuit City went out of business in 2009, according to Challenger, Grey & Christmas, an executive outplacement firm.

"This company had a long history of taking on debt and kicking the can down the road for 10 years, and refinancing", said Douglas M. Foley, a lawyer at McGuireWoods, who is representing a lender in the Toys "R" Us bankruptcy.

When Toys "R" Us filed for bankruptcy in September 2017, it disclosed it had about $5 billion in debt and was spending about $400 million a year just to service that debt.

Toys "R" Us CEO David Brandon has said the company will try to bundle its Canadian business with about 200 USA stores as it looks to find a buyer, but the MGA spokesperson declined to provide details on how much of the business Larian has made a bid for.

"I am very disappointed with the result, but we no longer have the financial support to continue the Company's USA operations", Dave Brandon, Chairman and CEO of Toys R Us, said in a statement.

It also announced it is pursuing a "going concern reorganization" and a sale process for its Canadian and global operations in Asia and Central Europe, including Germany, Austria and Switzerland.

"This is the largest and most rapid deterioration of a retailer and maybe that any Chapter 11 has ever entertained", he said.

It is in talks to sell 200 of those stores as part of a deal to sell its 80-odd stores in Canada.

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Toys R Us, which for decades was the nation's go-to store for toys and games, said it plans to shutter all 735 stores in the United States and Puerto Rico.

Toys "R" Us employs more than 30,000 people, and according to one estimate, accounted for about 20 percent of all toy sales a year ago. All were operating as normal this morning as they await their fate in bankruptcy court. "And if we do close, we don't know if we'll even get severance pay".

In Hong Kong, where Toys R Us has 15 stores, parents said there were few other choices in a retail market dominated by a few big players.

But Brandon told employees its sales performance during the holiday season was "devastating", as nervous customers and vendors shied away.

The debate over who and what killed Toys R Us is now raging among analysts, company executives, and shoppers lamenting the chain's death. "I bring my kids, my daughters, and they love it". But the likely liquidation will have a bigger impact on smaller toy makers that rely more on the chain for sales.

But Toys R Us has started the process of closing its stores, including Babies R Us and Toys R Us in New Springville. These stores are now open and serving customers.

Recent struggles at Walmart and Target are also hurting Hasbro and Mattel. And then the emergence of Amazon sped its demise.

But Toys R U's biggest albatross was its massive debt load since private-equity firms Bain Capital, KKR & Co. and Vornado Realty Trust took it private in a $6.6 billion leveraged buyout in 2005.

In addition to seeking added retail outlets for their goods, the toymakers might have to implement job cuts, refinance their balance sheets and perhaps entertain merger offers, depending on how much business they've done with Toys R Us, Silver said.

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