Toys ‘R' Us filed with the bankruptcy court for permission to wind down its U.S. operations and liquidate its inventory, according to the Wall Street Journal. Things had been headed in that direction since late last week (see “Toys R Us Approaching Total Liquidation”); when last minute negotiations with creditors on Wednesday were unsuccessful, the company took the final step toward shutting down the chain, according to the New York Times.
The move affects around 800 U.S stores and over 30,000 employees.
Efforts will be made to sell stores in other markets, including Canada, where toy company MGA Entertainment is trying to rally investors to make a bid, according to Bloomberg. Some U.S. stores may also be involved. “If there is no Toys ‘R’ Us, I don’t think there is a toy business,” MGA CEO Isaac Larian said of the chain.
Toys ‘R’ Us likely could have survived without the over $5 billion in debt loaded on the company by Bain Capital, Kohlberg Kravis Roberts, and Vornado Realty Trust in a 2005 buyout. Debt service depleted resources the company needed to invest to keep its stores current and expand its e-commerce offerings. And at the end, the creditors decided they could recoup more money by a liquidation of the company than by supporting a restructuring to keep the chain alive.