Toys R Us Closes $3.1 Billion to Resurrect

Following Toys R Us recent bankruptcy filing for its US and Canadian stores, the toy chain says it’s planning its comeback, including updating its e-commerce platforms and modernising its stores.

Last Wednesday Toys R Us confirmed it closed on US $3.1 billion of financing facilities that will support the company’s operations during its recently announced bankruptcy filing regarding its financial restructuring process. Various lenders contributed to the debtor-in-possession (DIP) financing, including a JPMorgan-led bank syndicate.

Toys R Us says it will use the new funding to invest in “various initiatives” that will see it resurrect itself from its turmoil in the retail environment, including the renovation and modernising its store network through improved layouts, updated lighting patterns and other areas to bring it into the next era of retail shopping.

The investment will also include updating its e-commerce platforms and infrastructure to better reflect its brand, promote its products and provide improved delivery capabilities so “Toys R Us can effectively compete in the online shopping space”.

On 18th September 2017, Toys R Us US and Canadian subsidiaries, crippled by US $5 billion in debt and more powerful online competition, voluntarily filed for bankruptcy under Chapter 11 of the Bankruptcy Code relating to protection from its creditors, before the key holiday trading season.

Like so many retailers that are finding it challenging to co-exist with Amazon, analysts warned that the toy chain’s financial predicament was not helped by its slow uptake of going digital, as well expanding on its in-store experience.

“The fact that Toys ‘R’ Us ceded control of its own online offering to Amazon during a period where e-commerce began to really take off meant that the retailer was always playing catch up with its online competitors,” said Jon Copestake, chief retail and consumer goods analyst at the Economist Intelligence Unit, according to MarketWatch.

“Alarm bells will have been ringing for some time but it took until May this year for an online store revamp to take effect and it is difficult to see how Toys ‘R’ Us could address the structural challenges it faced without reducing its store footprint and significantly changing its proposition,” explained Copestake.

On 20th September 2017, Toys R Us received interim approval by the US Bankruptcy Court to access up to US $2.2 billion of the DIP financing. The company intends to seek final court approval to access the full amount of its US $3.1 billion DIP financing at a hearing that is scheduled for 10th October, 2017.

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