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Toys R Us filed for bankruptcy and people are sad

21 September, 2017, 00:42 | Author: Paula Vaughn
  • Toys R Us Files for Chapter 11 Bankruptcy

According to the court documents filed in Toronto in support of the insolvency under the Companies' Creditors Arrangement Act (CCAA) on Tuesday, business at Toys "R" Us stores in Canada was good, but got bogged down by credit issues facing its corporate parent in the U.S.

The toy chain filed for bankruptcy-court protection Monday night, another in a string of specialty retailers felled by Wal-Mart Stores Inc., Amazon.com Inc., and the rest of the online onslaught.

Toys "R" Us is working on developing a loan that would allow it to continue working while the company went through the possible Chapter 11 filing. Excuse us if we wax nostalgic over the prospect of the company disappearing (many of us bought a first toy for ourselves or kids there), but the company insists it has plans to stick around after it restructures a mountain of debt.

Prior to filing, the chain secured more than $3bn in financing from lenders including a JPMorgan-led bank syndicate and certain existing lenders to fund operations while it restructures, according to a company statement.

The move would ensure the Canadian subsidiary of the global toy retailer - which applied for creditor protection in the US on Monday and in Canada a day later - has an uninterrupted supply of merchandise as it heads into the busy holiday shopping season.

The big question as we head towards the end of the year and the retail sector's busiest time of the year is whether the collapse of Toys "R" Us is a harbinger of further retail weakness, or merely a result of a legacy of bad management in the USA, and that underneath there is a decent retail business underneath. Two years later, the first Babies "R" Us opened.

The Chapter 11 filing is among the largest ever by a speciality retailer and casts doubt over the future of its about 1,600 stores and 64,000 employees. GlobalData Retail estimates that in 2016 about 13.7 per cent of toy sales were made online, up from 6.5 per cent five years ago.

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The retailer introduced the "Hot Toy Finder", which tells customers exactly where in their local store to find the items featured on its "Holiday Hot Toy List".

So is this the end of Toys "R" Us?

Toys R Us' filing was not entirely surprising; there had been rumors for weeks that it might seek bankruptcy protection, and its top executives had warned in recent months that the chain was struggling.

In fact, the retailer's owners roughly a year ago started speaking to lenders in an effort to split the troubled USA arm from its more profitable worldwide business, a lender said.

The company does not plan to close a "disproportionate" number of its more than 1,600 stores across the country and aims to add smaller shops in urban areas including Washington, D.C., Boston and Detroit, Brandon said.

I'm sure I'm not the only one my age who feels a little bad for Toys R Us. He later began selling toys as well and adopted the Toys R Us name in 1957, with the backward R in the logo to give the impression a child had written it. In the early 1990s, sales grew at a 10 percent annual clip; previous year, they dipped 2.2 percent.

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