Toys ‘R’ Us To Pay $156 Million for Trade Claims

According to Joshua Sussberg, Toys ‘R’ Us’ lawyer, the retail company will set aside about $156 million to pay vendors for toys and merchandise shipped after its Chapter 11 bankruptcy filing in September 2017.

The hearing happened at the US Bankruptcy Court in Richmond, Virginia.

He added that the vendor reserve fund will be carved out of a broader budget meant to cover some expenses, as the retailer winds down its business in the largest-ever US retail liquidation.

On the contrary, lawyers who represent trade vendors said that the amount fails to cover total trade claims worth roughly $760 million.

Vendors, both heavyweight and smaller toy manufacturers, said in court papers that they were surprised when Toys ‘R’ Us announced the largest-ever US retail liquidation in March, putting payments at risk.

The disappearance of Toys ‘R’ Us and Babies ‘R’ Us in the United States put many vendors at risk of bankruptcy, experts said.

Toys ‘R’ Us’ $3.1 billion bankruptcy loan was spent to lenders and other expenses, including legal fees, according to lawyers. However, many vendors believed that the September 18 Chapter 11 filing shipment payments will be covered by the said loan.

Erika Morabito, a lawyer who represents a group of trade vendors said that it is really a hard pill to swallow. At the hearing, she said vendors remain in a ‘dire’ situation even after laying off employees and closing stores.

In September 2017, Toys ‘R’ Us filed for Chapter 11 bankruptcy protection, with a plan to restructure and emerge the company from bankruptcy. However, the store’s disappointing performance over the holidays made investors and lenders hesitant to put more money on the company.

The company announced on March 17 that it was liquidating all of its US stores.

Business as Usual in Canada, Central Europe

In the court hearings on Tuesday, US Bankruptcy Judge Keith Phillips approved the deal of Toys ‘R’ Us to sell its Canadian division for $234 million US dollars.

Phillips authorized the sale of Toys ‘R’ Canada to Toronto-based Fairfax Financial Holdings Ltd. According to Fairfax president Paul Rivett, the company plans to keep the 82 Canadian stores open.  He also plans to put the stores into the modern retail era, where parents can grab a coffee while their kids are playing.

On the other hand, Toys ‘R’ Us announced on Monday that its stores in Germany, Switzerland, and Austria are at stake for selling in an agreement with Smyths toy chain for $97.6 million. The company added that Smyths plans to rebrand the Central European stores as ‘Smyths Stores’.

Toys ‘R’ Us is also negotiating with several possible buyers for its Asian operations.

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