American retailer Toys 'R' Us has filed for protection under Chapter 11 in the US Bankruptcy Court for the Eastern District of Virginia in Richmond, Virginia, in order to restructure its outstanding debt.
The petition is restricted to the company’s US and Canadian operations.
In addition, the company’s Canadian subsidiary is also planning to seek protection under the Companies’ Creditors Arrangement Act (CCAA) in the Ontario Superior Court of Justice.
Through the bankruptcy and CCAA proceedings, the company intends to establish a sustainable capital structure that will fuel long-term growth.
Toys 'R' Us chairman and CEO Dave Brandon said: “Today marks the dawn of a new era at Toys 'R' Us where we expect that the financial constraints that have held us back will be addressed in a lasting and effective way.
“Together with our investors, our objective is to work with our debtholders and other creditors to restructure the $5bn 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.”
The company operates 1,600 Toys 'R' Us and Babies 'R' Us stores worldwide, along with 255 licensed stores and a joint venture partnership in Asia.
It is expected that the company will continue to operate its stores, as well as make payments to employees and vendors through the court-monitored proceedings.
In order to improve its financial position and fund its ongoing operations, the company has obtained a commitment for more than $3bn in debtor-in-possession (DIP) financing.
Toys 'R' Us also serves its customers through www.toysrus.com and www.babiesrus.com websites.
Image: Toys 'R' Us in Ontario. Photo: courtesy of Raysonho@Open Grid Scheduler/Grid Engine via Wikipedia.