Toys ‘R’ Us has filed for Chapter 11 bankruptcy protection in the U.S., and under the Companies’ Creditors Arrangement Act in Canada.  As we pointed out in our recent coverage of the travails of Toys ‘R’ Us (see "Toys R Us Faces Debt Problem"), the company’s future was going to be decided by its trade creditors, who would decide whether or not to ship it goods for the holidays without cutting back on credit.  Apparently, the company believed that it had to stabilize the situation to secure its supply and sought court protection.

All stores and the company website are functioning normally, the company said in a statement, with $3 billion in debtor-in-possession financing from a group led by JPMorgan and some of its existing creditors to provide cash for operations while in bankruptcy.  “Toys ‘R’ Us is committed to working with its vendors to help ensure that inventory levels are maintained and products continue to be delivered in a timely fashion,” the company said.

The underlying problem was the amount of the company’s debt and the $400 million portion that was coming due next year.  "Together with our investors, our objective is to work with our debtholders and other creditors to restructure the $5 billion 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,” CEO Dave Brandon said of the filing.

Toys ‘R’ Us has 1600 stores in its core and Babies ‘R’ Us chains worldwide.  This is the latest among a number of bankruptcies filed this year by retailers buffeted by online and mass merchant competition and declining store traffic; others include Payless, Gymboree, and Perfumania.