Sept. 16 (UPI) — Toys ‘R’ Us may file for bankruptcy before the holiday season as vendors cut shipments to the company on account of its efforts to refinance billions of dollars of debt.
The toy retailer is looking to refinance more than $5 billion of debt it has carried since a buyout more than a decade ago, but as it does so, vendors have pulled back shipments because of the cost of insuring them is becoming to expensive.
The company has hired Kirkland & Ellis LLP to help it refinance and reorganize itself, as well as to help guide a potential bankruptcy hiring — but is searching for a loan to extend debt maturities and prevent the need to file.
Toys ‘R’ Us makes about 40 percent of its annual sales during the holiday season and has already received most of its shipments for the holidays. Some vendors have threatened to cut off future deliveries unless cash payments can be provided upon arrival.
At highest priority for Toys ‘R’ Us is an effort to refinance $400 million of debt that will be due next year. There has not yet been a decision on seeking court protection from having to repay it though, say sources at the company.
Vendors have pulled back because when companies seek chapter 11 protection, they are often among the lowest priorities for payment.
Toys ‘R’ Us has, however, been profitable recently, reporting earnings of $790 million in its last quarterly filing — the most since 2012 — and second quarter 2017 earnings numbers will be reported on Sept. 26, when the company said it will also update investors on refinancing and other plans.