Toys "R" Us, $4.9bn in debt, files for bankruptcy

Toys 'R' Us bankruptcy fears hit Mattel and Hasbro

In a statement released late Monday night, the Toys "R" United States explained that they're filing for bankruptcy protection to "restructure its outstanding debt," in hopes that it will lead to more sustained long-term growth for the retail company.

America's largest toy stores chain, which has around 1,600 stores worldwide and almost 65,000 employees, said most of its shops remained profitable and would operate "as usual" while it looks to restructure a 5.6 billion U.S. dollar (£3.6 billion) debt mountain.

The company says the proceedings are a way for Toys "R" Us to work with its creditors on restructuring the debt beleaguering it.

Various lenders including JPMorgan (LSE: JPIU.L - news) have agreed to infuse Toys "R" Us more than $3 billion which will "immediately improve the Company's financial health and support its ongoing operations during the court-supervised process". In 2005, taking the company private, Bain Capital, KKR & Co., and Vornado Realty Trust loaded it with $7.5 billion in borrowing, and the company has been hamstrung ever since.

The bankruptcy news comes less than a month after the company decided not to take pre-orders on the SNES Mini, which previously sold out within minutes across retailers from Amazon to Target. Last year, Toys "R" Us accounted for 11 percent of sales at Mattel and 9 percent at Hasbro - the second most at both companies after Wal-Mart.

Will Toys "R" Us and Babies "R" Us continue to run typical sales and promotions? The chapter 11 protections will help out the company during the upcoming holiday season.

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Not all suppliers throughout the retail industry are as at risk as Toys R Us suppliers are, but the Toys R Us example shows what can happen when retailers go under. Given the choice of buying a train set online or in a store, particularly when a toy shop can transform even the calmest child into an insatiable lunatic, many parents opt to buy online.

To compete with e-commerce giants, traditional retailers as Toys "R" Us would have needed to slash prices to stay on the track.

"Will Toys R Us be around for Christmas in 2018?" "All of a sudden I've got this great big store that I never had before in the comfort of my home", Konicek added.

"Once these initiatives are implemented, Toys R Us stores will be interactive spaces with rooms to use for parties, live product demonstrations put on by trained employees, and the freedom for employees to remove products from boxes to let kids play with the latest toys", CEO David Brandon said in court papers. "They're a major buyer and I would say that the majority of toy makers in China would have some contracts with them". 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.

It also plans to close an unspecified number of its 1,600 stores. Its shares dropped 6.6 percent.

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