Toys“R”Us Bankruptcy Hearing Answers Creditors’ Questions

October 26, 2017 | The Toy Association was present at a recent hearing regarding the Toys“R”Us bankruptcy case in order to track progress and relay critical information to members. Held in Richmond, VA, the October 24 meeting was moderated by the U.S. Trustee’s Office and allowed various creditors, including industry stakeholders, financiers, and others, to ask questions to Toys“R”Us representatives.

The Toy Association has compiled a list of relevant questions from the meeting, as well as the answers provided by Michael Short, chief financial officer at Toys“R”Us. Members with questions about this case are encouraged to contact Paul Vitale, the Association’s executive vice president of finance and operations, who was present at the meeting.

Q. Why did Toys“R”Us file for bankruptcy?

A. Short cited a liquidity problem arising from cash flow issues and the inability of the retailer to meet debt maturities.

Q. When is Toys“R”Us expected to have a required Statement of Financial Affairs ready?

A. Short responded that it should be ready by November 17, but it was later stated that they would try to have the statement available prior to the next hearing, tentatively scheduled for November 16.

Q. What are the debtors’ plans with respect to store closings?

A. Short stated that there would be no store closings until after the holiday season. He said that they are in process of reviewing the stores, and may combine some stand-alone stores into single side-by-side stores, but stand-alone stores will continue to exist.

Q. What is the status of critical vendors, foreign vendors, and the handling of 503b9 claims?

A. Short indicated that Toys“R”Us is in negotiations with 49 of their top 50 suppliers, saying that they do not expect to disclose which vendors qualified for critical vendor status, how much those vendors have been paid, or the terms for being a critical vendor. He said the company’s CEO, himself, and their chief merchandising officer are the primary decision-makers selecting critical vendors. No specific information was provided about foreign vendors. Short also indicated that they are paying attention to smaller suppliers based on the products they supply, or their reliance on Toys“R”Us to remain viable. He also indicated that 503b9 claims required to be paid would be paid – but stated that a date for payment has not been set.

When asked about news reports valuing the company’s Asia business at $2 billion, Short indicated that no investment bankers have been engaged to evaluate that potential.

The Toy Association is working with outside legal counsel, the Unsecured Creditors Committee, and the debtor to create a dedicated website with FAQs to keep creditors better informed; it is expected to be established shortly after the next round of court hearings and decisions. Members will be kept apprised of developments.