Toy Stocks Mostly Lower After Toys 'R' Us Confirms Bankruptcy

Retailer Toys "R" Us has filed for Chapter 11 bankruptcy protection in a U.S. court, the company said, amid heavy debt and a tough environment for bricks and mortar stores.

At one time Toy "R" Us was the first stop for shoppers for birthdays and holidays but has recently faced increased competition from retailers online and the big box chains such as Target and Walmart, which most of the time offer the same toys at lower prices.

United States toy retailer Toys "R" Us has filed for bankruptcy protection in the United States and in Canada in a bid to restructure its debts.

TRU operations outside of the USA and Canada, including about 255 licensed stores and joint-venture partnerships in Asia, are separate entities and were not included in the proceedings.

Toys "R" Us Inc, the toy store giant with branches across the US, Canada, UK and Japan has filed for bankruptcy.

The company said it would use the bankruptcy protection to restructure its $5 billion in debt and put into place new long-term strategies to cope with a challenging world for traditional retail models.

The chain is saddled with debts following a $6.6bn buyout in 2005 led by KKR & Co and Bain Capital LP, together with real estate investment trust Vornado Realty Trust. That amount is over a third of what Toys "R" Us brings in, which has seen five years of decline.

Andre Javes said: "Toys "R" Us (Asia) is open for business and continuing to serve our customers as we always do". The Toys R Us loyalty program also remains in effect and the store will continue to accept all returns and honor all warranties.

"We are confident that we are taking the right steps to ensure that the iconic Toys " R " Us and Babies " R " Us brands live on for many generations", said chairman and CEO Dave Brandon. Holiday sales are crucial to Toys "R" Us.

Toys R Us has around $5bn worth of long-term debt on its balance sheet, a substantial chunk of which needs to be repaid next year. Among those likely to lose money are holders of the company's $400 million bond that is due next year.

  • Wendy Palmer