Toys “R” Us Inc has been making $400 million in interest payments on its debt every year, largely due to its $6.6 billion leveraged buyout in 2005, Reuters reported yesterday. This week, it succumbed to its debt burden, leading to the biggest bankruptcy of a U.S. retailer since that of Kmart in 2004. The largest U.S. toy retailer’s decision to file for chapter 11 bankruptcy protection on Monday took investors by surprise, given that the company faced no imminent debt maturities and had managed to overcome financial stress in the past by securing concessions from its creditors. But the company’s ability to kick the can down the road had become exhausted. The bankruptcy filing was the culmination of an unsuccessful seven-month effort by Toys “R” Us to find relief from its $5.2 billion debt pile, according to bankruptcy court filings and people familiar with the deliberations. Read more.
What does the future hold for retail bankruptcies? Be sure to attend ABI’s Bankruptcy 2017: Views from the Bench on October 17.
