Late last night, Toys’R’Us – the largest toy retailer in North America – filed for Chapter 11 bankruptcy. Toys’R’Us has struggled since 2005 when it was part of a $6.6 billion transaction. 12 years later Toys’R’Us is still $5 billion dollars in debt and is faced with over $400 million dollars due in fiscal 2018 which it was not going to be able to pay. Hence the bankruptcy filing.
So what does this mean for all your favorite collectibles? Well, right now – nothing. Chapter 11 bankruptcy is nothing more than a legal stop sign for any creditors trying to collect on the debts that Toys’R’Us owes. It gives Toys’R’Us the ability to reorganize it’s financial debts – which it has already begun with JP Morgan agreeing to finance $3 billion of the remaining $5 billion debt.
As of right now – Toys’R’Us is NOT going out of business. NO store closures have been announced nor are expected during this year’s holiday season. New toys will CONTINUE to come out. Anything that has been announced as a Toys’R’Us exclusive will come out. Toys’R’Us has stated that business operations will continue as normal.
Analysts watching the situation agree that JP Morgan agreeing to finance $3 billion of debt has the potential to allow Toys’R’Us to emerge from the Chapter 11 bankruptcy filing in strong standing. In 2009, Toys’R’Us acquired the remaining assets (namely the name, trademarks, and intellectual property) of KB Toys, the other national toy retailer. KB Toys filed for Chapter 11 bankruptcy in 2004, and later filed again in 2008, shutting down all operations within 3 months of the filing. Ironically, the second bankruptcy filing that killed the business was initiated by a former Toys’R’Us executive who was then acting as CEO to KB Toys and then sold the remaining assets to Toys’R’Us.