Toys 'R' Us files for bankruptcy ahead of the holiday season

Toys R Us Files for Chapter 11 Bankruptcy

Short-term, that means stores will continue to operate as usual.

The retailer said Monday night that, "to achieve its financial objectives, Toys'R'Us and some of our USA subsidiaries and our Canadian subsidiary proactively and voluntarily filed for Chapter 11 of the Bankruptcy Code in the U.S".

Toys "R" Us - once a dominant player in the American toy market - filed for bankruptcy protection Monday night with a crushing debt load that had turned the 1,600-store chain into an also-ran against larger rivals such as, Walmart and Target. Toys "R" Us had more than $5 billion in long-term debt as of last April, and more than half of that sum is due for repayment over the next 12 months.

"Chapter 11 was certainly not the company's preferred outcome", Chief Executive David Brandon said in a court filing. Toys R Us' Canadian subsidiary intends to seek similar protection under the Ontario Superior Court of Justice's CCAA. Many expected a bankruptcy, but the filing, just ahead of the vital holiday selling season, underlines how squeezed the firm has become.

Meanwhile, credit ratings of Toys "R" Us took a beating as rating agencies lowered their ratings as a result of the bankruptcy filing.

The company entered Chapter 11 with $3 billion in debtor-in-financing funding from a bank syndicate led by JP Morgan Chase & Co., along with certain current lenders.

Mark Lee, an associate professor at Ted Rogers School of Retail Management at Ryerson University, added that Toys "R" Us needs to move beyond having expensive toys lined up along store aisles. How is shopping in these kinds of stores different from shopping online?

Toys R Us is looking to come out of bankruptcy protection once it has finished its restructuring process. Toys R Us is also where I played Resident Evil on the PlayStation for the first time too.

Toys R Us also says that it will continue to treat employees the same during its bankruptcy. Initiatives include improving its website and revamping its Babies R Us business, by focusing on items like cribs that are less likely than diapers to be sold on Amazon. Merchandise is sold in 885 Toys " R " Us and Babies " R " Us stores in the United States, Puerto Rico and Guam, and in more than 810 global stores and over 255 licensed stores in 38 countries and jurisdictions. Toys R Us suppliers started stepping back a little too late - reminding suppliers everywhere that paying attention to your buyer's financial health is as important as managing your own.

"Foreign suppliers are, in fact, given an advantage because they don't abide by the law, whereas Canadian companies that abide by the law are not being paid", said Brzezinski, adding that the ruling affects USA suppliers as well, under North American treaty agreements.

The Associated Press reported that GlobalData Retail estimates that in 2016 about 13.7 percent of toy sales were made online, up from 6.5 percent five years ago.

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