Toys "R" Us Might Be Filing For Bankruptcy Due To Its Massive Debt
The global toy retailer is in some serious financial trouble.
By John Lim — 08 Sep 2017, 01:03 PM
Popular toy retailer Toys "R" Us is looking at the possibility of filing for bankruptcy due to its massive debt
According to CNBC, Toys "R" Us currently owes USD5 billion in debt, USD400 million of which is due by next year.
The US-based retailer, which has over 750 international stores and more than 245 licensed stores in 37 countries, has reportedly hired a law firm to weigh in on its restructuring options, which can range from bankruptcy filing to fund raising.
In a statement, the company said it would provide an update on how it planned to deal with its debt when it announced second quarter earnings later this month
“As we previously discussed on our first quarter earnings call, Toys "R" Us is evaluating a range of alternatives to address our 2018 debt maturities, which may include the possibility of obtaining additional financing,” it said as quoted by Reuters.
Due to the massive debt, the company was not able to make investments it needed to compete with rivals, especially in e-commerce
Howard Davidowitz, the head of the retail consultancy and investment bank Davidowitz & Associates also told CBS that Toys "R" Us' financial woes can be traced back to the sale of the company to a group of investors. The group consists of private equity giants KKR and Bain Capital and Vornado Realty Trust.
More than a dozen American retailers including children’s clothier The Gymboree Corporation and teen apparel seller Rue21 Inc have filed for bankruptcy this year as consumers shift their spending habits to e-commerce competitors.
