Over the weekend, we reported that vendors to iconic toy retailer Toys "R" Us had halted shipments over payment concerns and/or getting their receivables crammed down alongside other unsecured claims ahead of what appeared to be an imminent bankruptcy. Well, they were right, and according to Bloomberg a Chapter 11 filing by Toys "R" Us is to be expected as soon as tonight.
The latest Amazon casualty, Toys "R" Us bankruptcy filing would send America’s largest toy chain to bankruptcy court, dealing another blow to a brick-and-mortar industry that’s already reeling from store closures and sluggish mall traffic and conclude the saga of one of the last pre-crisis LBOs in which Bain Capital, KKR and Vornado Realty Trust saddled up the company with $7.5 bilion in debt.
According to Bloomberg, the retailer has already hired a claims agent meant to help administer a Chapter 11 process. What is unclear is whether the company will have sufficient liquidity to assure its vendors who have imposed an effective COD blockade on the company, to provide it with much needed holiday season merchandise. And speaking of Toys "R" Us vendors, as speculation of a bankruptcy mounted over the weekend, their shares tumbled: Mattel, the maker of Barbie and Fisher-Price, fell 6.2% while Hasbro, which makes Monopoly, Nerf and Transformers, dropped 1.7%, its biggest decrease in almost two weeks.
Predictably, as we showed on Saturday, Toys CDS has exploded as the cost of insuring the company against default surged, with prices of six-month and one-year CDS hitting record highs.
Finally, the most amusing chart is that of Toys "R" Us bonds which crashed some more on the Bloomberg report, and which were happily trading at par until just a few weeks ago, only to be shocked by the recent news report that the company had hired bankruptcy advisors, crushing all hopes that the company's maturing debt would be rolled over, as even its PE sponsors decided they had had enough.
Once the filing hits the docket officially, we look forward to updating the full list of 2017 YTD retail bankruptcies which one can probably also call "Exhibit A" in any Amazon anti-trust hearing.