Toys “R” Us (Asia) Ltd. on Tuesday clarified that its stores in Hong Kong and other parts of Greater China and Southeast Asia remain open and unaffected by the US company’s financial restructuring.
Toys “R” Us Inc., the largest US toy store chain, filed for bankruptcy protection late Monday, the latest sign of turmoil in the retail industry that is caught in an intensifying competition with online shopping and discount chains.
The Chapter 11 filing is among the largest ever by a specialty retailer and casts doubt over the future of its about 1,600 stores and 64,000 employees, Reuters reports. It comes just as Toys “R” Us is gearing up for the holiday shopping season, which accounts for the bulk of its sales.
However, Toys “R” Us (Asia) said in a statement that it operates as a separate legal entity and is financially independent from all other Toys “R” Us operating companies around the world.
Toys “R” Us (Asia) is a joint venture between the Wayne, New Jersey-based company and Fung Retailing Ltd., a privately held entity and member of the Hong Kong-based Fung Group. Fung Retailing holds 15 percent of the venture, and the rest is owned by the US chain.
The US mother company said it received a commitment for over US$3 billion in debtor-in-possession financing from lenders including a JPMorgan-led bank syndicate and certain existing lenders.
The financing, subject to court approval, reassures its suppliers they will get paid for their Lego building blocks and Barbie dolls that are being shipped for the holiday season.
“We expect that the financial constraints that have held us back will be addressed in a lasting and effective way,” chief executive Dave Brandon said.
“Together with our investors, our objective is to work with our debtholders and other creditors to restructure the US$5 billion of long-term debt on our balance sheet.”
Its Canadian unit intends to seek protection in parallel proceedings under the Companies’ Creditors Arrangement Act (CCAA) in the Ontario Superior Court of Justice, the group said in a statement.
Operations outside of the United States and Canada, including about 255 licensed stores and joint venture partnerships in Asia, which are separate entities, are not part of the bankruptcy proceedings, it said.
The group is saddled with debt from a US$6.6 billion buyout in 2005 led by KKR & Co. LP and Bain Capital LP, together with real estate investment trust Vornado Realty Trust.
Toys “R” Us has bonds coming due next year that have lost half their value this month, according to Thomson Reuters data, as investors have grown concerned about a possible bankruptcy.
“While today’s decision does not necessarily mean it is game over for Toys ‘R’ Us, it brings to a close a turbulent chapter in the iconic company’s history,” said Neil Saunders, managing director of GlobalData Retail.
Toys “R” Us (Asia) and its subsidiaries operate 226 stores in Brunei, China, Hong Kong, Malaysia, Singapore, Taiwan and Thailand and licenses an additional 35 stores in the Philippines and Macau.
In March, Toys “R” Us Japan was successfully integrated into Toys “R” Us (Asia), adding 161 more stores to the pan-Asia toy store chain.
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