Toys R Us has filed for Chapter 11 bankruptcy in a move the company says will restructure $5 billion of long-term debt.
Calling it a “new era at Toys R Us,” Chairman and CEO Dave Brandon said, “We expect that the financial constraints that have held us back will be addressed in a lasting and effective way.”
There were five separate cases filed in U.S. Bankruptcy Court for the Eastern District of Virginia dated Tuesday, including the company’s Canadian subsidiary, along with Toys R Us Delaware and Toys R Us Europe.
The company is headquartered in Wayne.
Operations outside the United States and Canada — which include about 255 licensed stores and a joint venture partnership in Asia — are not part of the filings.
The majority of the 1,600 Toys R Us and Babies R Us stores around the world are profitable, and all will operate as usual.
Loyalty programs like Rewards R Us, Geoffrey’s Birthday List and Babies R Us Registry remain in place.
“Together with our investors, our objective is to work with our debtholders and other creditors to restructure the $5 billion of long-term debt on our balance sheet, which will provide us with greater financial flexibility to invest in our business, continue to improve the customer experience in our physical stores and online, and strengthen our competitive position in an increasingly challenging and rapidly changing retail marketplace worldwide,” Brandon said. “We are confident that these are the right steps to ensure that the iconic Toys R Us and Babies R Us brands live on for many generations.”
The company’s financial health is expected to get a boost when the court approves more than $3 billion in debtor-in-possession financing already promised from various lenders, including a JPMorgan-led bank syndicate and certain existing lenders.
“Toys R Us is committed to working with its vendors to help ensure that inventory levels are maintained and products continue to be delivered in a timely fashion,” Brandon said.
In conjunction with the Chapter 11 process in the U.S., the company has filed a number of customary motions with the bankruptcy court seeking authorization to support its operations during the restructuring process and ensure a smooth transition into Chapter 11 without disruption, including authority to continue payment of employee wages and benefits, honor customer programs and pay vendors and suppliers in the ordinary course for all goods provided on or after the filing date.
The appointment of an independent monitor was expected to be announced later Tuesday.