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Home>UPDATE: Amazon isn't the only reason Toys 'R' Us filed for bankruptcy

UPDATE: Amazon isn't the only reason Toys 'R' Us filed for bankruptcy

UPDATE: Amazon isn't the only reason Toys 'R' Us filed for bankruptcy

09/20/2017

By Tonya Garcia, MarketWatch

Timing of toy retailers bankruptcy filing suggests concerns over 'subdued' holiday season

Amazon.com Inc., of course, shares some of the blame for Toys 'R' Us Inc.'s bankruptcy filing. However, experts say there are a number of reasons why the toy retailer filed chapter 11, some that go back for years indicating the company was in trouble for quite some time.

"Certain larger retailers that filed for bankruptcy had burdensome levels of debt resulting from their private equity owners' uses of financing in acquiring the companies," tax and advisory firm BDO wrote in a September report.

In addition, UBS analysts led by Arpine Kocharyan wrote in a Monday note that a "chapter 11 filing heading into Q4 may be indicative of a subdued holiday outlook by Toys 'R' Us."

The toy retailer's bankruptcy filing was triggered by stricter terms from vendors and suppliers ahead of the holidays, The Wall Street Journal reports (https://www.wsj.com/articles/toys-r-us-once-a-category-killer-is-forced-into-bankruptcy-1505792620). The filing was expected, and comes as all of retail is undergoing a shift to e-commerce and heightened competition from a variety of sources. Toys 'R' Us operates about 1,600 stores around the world, and said business would proceed as usual for customers, though some bankruptcy experts warn there could be noticeable changes (https://moneyish.com/ish/this-is-how-the-toys-r-us-bankruptcy-might-ruin-your-holiday-shopping/), like difficulty finding popular toys.

Toys 'R' Us plans to use the bankruptcy to restructure $5 billion in debt and create "a sustainable capital structure." The debt, $444 million of which was due next year, stems largely from a $6.6 billion leveraged buyout, led by Bain Capital, KKR & Co. (KKR) and Vornado Realty Trust (VNO) in 2005.

In the first six months of 2017, more than 20 retailers filed for bankruptcy with thousands of stores closing.

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