Bloomberg reported:
Some suppliers to Toys “R” Us Inc. have scaled back shipments to the retailer as it struggles to refinance debt and avoid a potential bankruptcy filing, according to people with knowledge of the matter.Bain Capital owns Toys "R" Us alongside fellow private equity underwriter (PEU) KKR:
The vendors are balking as Toys “R” Us continues talks with lenders over a new loan that would allow the company to stay open while it works out a recovery plan through bankruptcy proceedings, said the people, who asked not to be identified because discussions are private. The loan is being marketed by Lazard Ltd. to banks and existing creditors, said one of the people.
Toys “R” Us has vexed private equity owners Bain Capital, KKR & Co. and Vornado Realty Trust, which loaded the retailer with debt in a $7.5 billion buyout more than a decade ago.
As doubts about the company’s health mounted, the cost for debtholders to insure against a default by Toys “R” Us surged in the past week to levels that imply a more than 60 percent chance it won’t meet its obligations in the next year. Credit-default swaps expiring in June were trading at 36 percentage points upfront, or $3.6 million for every $10 million of debt insured, according to data provider CMA. That’s up from $300,000 per $10 million at the start of the month.
Toys "R" Us bonds fell to 43 cents on the dollar on Friday. CDS coverage rose to $4.6 million for every $10 million of debt insured.
Bain, KKR and Vornado won't throw good money after bad. They are shopping for "a DIP loan to fund operations under chapter 11." Will Toys "R" Us owners have gotten their money's worth from the company before they return it to debtholders?
Update 9-18-17: Implosion is imminent. Bloomberg reported "Credit default swaps expiring in December traded at more than 75 points
upfront Monday. That means it would cost about $7.5 million to insure
$10 million of Toys “R” Us debt. Its 7.375 percent notes due 2018 traded for as little as 18 cents during Monday’s session."
Update 9-19-17: Bain, KKR and Vornado returned Toys "R" Us to bondholders with its bankruptcy filing in Richmond, Virginia. It's the second largest retail bankruptcy filing ever.
Update 6-3-18: The PEU boys reneged on employee severance pay mostly because they don't care about the little people. Cash goes to sponsor via dividend bleeding. None is left for the hardworking people who've spent a career. Employees reached out to Blue Team corporacrats Robert Menendez and Cory Booker for help. That pair may toss Toys R Us employees an anchor.
Update 7-2-19: CBS News reported Toys R Us "workers are getting $2 million, a fraction of the $56 million
in fees awarded to Kirkland & Ellis, the law firm representing Toys R
Us, the decision is still a victory of sorts. That's because pensions
and severance payments are labeled as unsecured debt when a company
files Chapter 11, making them low priority and less likely to be paid. A
bankruptcy judge on Thursday approved the settlement to a class-action
lawsuit filed on behalf of 33,000 former Toys R Us workers, a figure
that means each will receive about $60."
Update 1-19-22: Bloomberg reported Toys 'R Us directors and owners may face the music for self serving decisions as the company imploded:
Creditors claim in ongoing litigation that seven company directors have now said they knew they shouldn’t have approved executive bonuses and onerous bankruptcy loans at the outset of the case that put the retailer on the fast track to a sudden liquidation six months later.
Owners and directors who signed off on the ill-fated financing received immediate bonuses of as much as $2.8 million as part of the plan,
