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Toys 'R' Us restructuring debt

07 September 2017

Toy "R" Us now is evaluating a number of different alternatives to address the debt maturities it has in 2018, which could include obtaining more financing, said a spokesperson for the toy company in a prepared statement Wednesday afternoon.

Toys "R" Us CEO Dave Brandon is looking to spruce up stores with more toy demonstrations and other experiences - seeking an edge on online sites such as Amazon.

Toys "R" Us Inc has hired law firm Kirkland & Ellis LLP to help weigh restructuring options ranging from a bankruptcy filing to raising financing as bricks and mortar retail goes through a major downturn, Reuters reported.

Toys R Us was able to successfully refinance some of its debt past year, which gave the retailer more time to figure things out before facing billions in debt repayments.

More than a dozen retailers including children's clothier The Gymboree Corporation and teen apparel seller Rue21 Inc have filed for bankruptcy this year as consumers shift their spending habits to e-commerce competitors. "For a robust retailer, debt payments can be challenging". "For a retailer struggling to generate sales growth while, at the same time, trying to invest to remain relevant - it can be the difference between success and failure".

A restructuring would help Toys "R" Us get its house in order ahead of the all-important holiday season, when the company has its biggest sales surge. The company was purchased in 2005 by Kohlberg Kravis Roberts, Bain Capital Partners, and Vornado Realty Trust in a deal valued at $6.6 billion. "In our view, this is an example of private equity damaging retailers by not running them as commercial trading entities but as ATMs". Moreover, S&P and Moody's Investors Service have given the retailer B-level long-term ratings, and Toys R Us' bonds have been trading at face value, rather than with the sort of premiums on bonds for companies on the brink of bankruptcy, Emma said.

Toys "R" Us has sufficient liquidity for its needs this year, despite a decline in the cash on its balance sheet to US$211 million at the end of the second quarter, a July Bloomberg Intelligence report showed.

Toys 'R' Us restructuring debt