The toy company’s restructuring advisers may be considering filing for Chapter 11 protection in the U.S. Bankruptcy Court in Richmond, Virginia after pressure from uncertain suppliers continues and $400 million of its $5 billion debt comes due next year. A move that came as a shock to the company’s creditors, evident by the bond then crashing to 43 cents to the dollar on Friday. The Chapter 11 filing could be due to the retailer’s suppliers withholding stock shipments until they are paid in cash upon delivery, something that is becoming more and more challenging with the increase in buyers opting for more discounted retailers or online shopping versus heading into a brick and mortar store.
The company itself has suffered a $7.5 billion in debt since having been bought out by firms KKR & Co L.P. and Bain Capital LP, together with real estate investment trust Vornado Realty Trust, all who took Toys “R” Us private for $6.6 billion in back 2005.
However the plans have not yet been made public and are currently speculation as Toys ‘R’ Us opened a store in New York City’s Times Square this year to capture more holiday shoppers in the upcoming holidays, something that won’t work if the retailer’s suppliers get cold feet and refuse to stock the stores with much need inventory.