Private-Equity Debt Drives Toys R Us to Liquidate

If you have a Toys "R" Us gift card lying around the house, better use it quick.

The American Specialty Toy Retailing Association, a trade group that represents almost 2,000 independent toy stores, manufacturers and industry sales reps, said in a statement Thursday that the closing of Toys "R" Us is "another example of the ongoing change and evolution" in the toy industry.

According to CNBC.com, most of the company's Toys R Us and Babies R Us stores are mostly in the range of more than 40,000 square feet, ranging up to more than 65,000 square feet.

According to national reports, the company hopes to sell some of its stores, which could keep them open. Toys R Us, which is awaiting court approval for its liquidation request, has already assembled a collection of liquidation firms to take over its stores and sell off inventory as quickly as possible.

Unfortunately, the overconfident execs at Toys R Us were forced to meet with creditors and come up with a new solution to relieve some of the financial pressure after taking another brutal hit over the holidays.

A retailer in California is now bidding on the Canadian branch of Toys R Us, with the potential sale marking a huge step in the right direction for keeping the Canadian stores open and keeping the current staff employed.

The toy makers will also have to find new places to sell their goods.

Fierce competition in the toy segment ultimately led to its demise, including competition from Walmart, Target and Amazon.

Kirkland & Ellis LLP is serving as principal legal counsel to Toys "R" Us. Both have posted lackluster financial results of late, and there was talk past year about the possibility of a merger between them.

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The toy store faced several other big challenges at about the same time. Toys R' Us had not turned a profit since 2012. Its scale gave it leverage with toy sellers and it disrupted general merchandise stores and mom-and-pop shops. Stephanie Wissink, a toy analyst at Jefferies, wrote in a recent note that small companies will explore selling themselves to survive.

The company's troubles have affected toy makers Mattel and Hasbro, which are big suppliers to the chain. "Someone could buy this company, flip off all the real estate and be sitting in a pretty comfortable position", said Don Gregor, vice-president, Aurora Realty Consultants.

Toys R Us filed for Chapter 11 bankruptcy in September.

"Well you get to actually see them and I get a little joy looking at them in the vehicle ride home", said Lambou.

That struggle has finally caught up with them.

Her mom says the collection is hard to find.

"I've got a 9 year old, 6 year old, and a 2 year old, and when you think about it - Aiden, Addison, and Austin - and they love Toys "R" Us". And other seemingly dead retailers have a way of coming back to life.

In January, the company amended their initial statement, advising customers they would be closing 182 stores as part of a restructuring plan.

Despite sharply declining sales, Toys "R" Us was also extremely late to the game in closing stores.