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Toys 'R' Us is having the post-Christmas sale that many people saw coming.
That's because the company is in bankruptcy, and there appears to be no way out except liquidation. According to reports, it is making preparations for the big sale now.
It will mark the end of a store that put toys under American Christmas trees for generations. But this Christmas, there will be no more Toys "R" Us.
Founded in 1948, the store grew into the largest U.S. toy chain. In the 1990s, sales were increasing 10 percent annually.
Online competitors and other economic factors challenged the company, however. In 2005, it went through a leveraged buyout that loaded Toys "R" Us with debt.
Ballooning interest payments and the rise of Amazon started to crush the business. Toys "R" Us entered bankruptcy last year, hoping to restructure its debt with a $3.1 billion loan.
With retail hitting a rough patch across the country, the strategy didn't work. The company is looking for a buyer or another loan, but according to industry insiders, it's not happening.
Bloomberg reported that "a shutdown of the the U.S. division has become increasingly likely."
"While a Chapter 11 bankruptcy provides a company with breathing space, it is incumbent on the debtor's management to show how it intends to reorganize as a going concern," said bankruptcy attorney Gregory Plotko. "My sense is that the major creditor group has not yet heard a compelling enough story, nor has a 'white knight' appeared."
Kirkland and Ellis, a top ranked restructuring firm, was hired to look at options for the struggling retailer. Refinancing was on the Christmas list, but the attorneys had some bad news.
Bankruptcy was the only way out of billions of dollars in debt. The Christmas crisis was actually a long-time coming.
Meeting with a lawyer can help you understand your options and how to best protect your rights. Visit our attorney directory to find a lawyer near you who can help.
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