Toys R Us plans to shutter about 20% of its U.S. store fleet, saying "tough decisions" are needed to reinvent their brands. USA TODAY
Customers shop at a Toys R Us store on Jan. 24, 2018, in Highland Park, Ill. The store is one of the approximately 170 stores that is closing in the U.S. Store-closing sales began Wednesday, Feb. 7, 2018.(Photo: Scott Olson, Getty Images)
Toys R Us downplayed a report Wednesday that it is close to being forced into liquidation, a move that could result in the closure of the entire chain.
The toy retailing giant has not breached any of the covenants governing its bankruptcy financing, a spokeswoman said. She called a CNBC report that the retailer could be at risk of liquidation "full of speculation."
CNBC reported Wednesday that sources familiar with the situation said Toys R Us is in danger of breaching a covenant on one of the loans that make up the $3.1 billion in debtor-in-possession financing. It's that financing that has allowed the company to remain in business while it reorganizes in U.S. Bankruptcy Court.
If Toys R Us were to violate terms of the loans, which require it to maintain certain cash balances, its lenders could take steps that would force the retailer into liquidation.
"We have not breached any covenants," said the spokeswoman Amy von Walter.
CNBC reported that its sources said Toys R Us, which is based in Wayne, N.J., currently is in compliance with its loan terms, and that it has a number of options, as well as the support of the lenders, making such a move unlikely.
Attorneys for the lenders and creditors have repeatedly told the bankruptcy court that it is in everyone's best interests that Toys R Us survives.
But holiday sales that were significantly weaker than expected have put Toys R Us in a worse financial position than was anticipated when the debtor-in-possession covenants were drawn up.
Toys R Us this year did not release its holiday sales results, but sources told The (Bergen County, N.J.) Record that store sales dropped by 9% and online sales were down by roughly 20%.
Toys R Us, a nostalgic favorite even as many shoppers moved to Amazon and huge chains like Walmart, plans to close up to 182 stores, or about 20 percent of its U.S. locations. (Jan. 24) AP
At the North American International Toy Fair in New York City this week, a number of manufacturers said their 2017 sales were hurt by the September bankruptcy filing of Toys R Us. Manufacturers said many consumers apparently had the mistaken impression that all Toys R Us stores were closing, and that the retailer didn't do enough to combat that impression.
Toys R Us is conducting going-out-of-business sales at about 170 stores around the country, roughly 20% of its U.S. stores. The company has said it plans to emerge from bankruptcy before the 2018 holiday as a leaner and more innovative retailer.
Source : https://www.usatoday.com/story/money/business/2018/02/21/toys-r-us-denies-report-may-forced-liquidate/361546002/826