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Toys R Us seeks ?120m lifeline as survival battle intensifies

Toys R Us has appealed to investors for a ?120m lifeline as crucial payment deadlines loom at the end of the month.
The UK arm of the troubled retailer was put on the block last week, with management proposing a five-year plan to fight back against Amazon and Argos. 
It is understood that potential buyers would have to stump up around ?50m immediately to pay off the consortium of bank lenders that have provided financing to its US parent company. It entered bankruptcy protection in September and gained access to $2.2bn from a consortium led by JP Morgan.
According to sources who have seen proposals for Toys R Us in the UK, the retailer is also seeking around ?70m in the first year to fund a major overhaul of its store estate and more competitive pricing.
The chain has already won approval from creditors to close 26 loss-making stores with the loss of around 800 out of 3,200 jobs. Toys R Us told potential buyers it could also cut around 20pc of staff from central overheads and reduce stock ranges by a tenth to further bring down costs. As well as shutting stores, Toys R Us said it also wants to reduce the floorspace of its 79 remaining stores by more than a third and secure rent reductions. 
It then plans to open more than 30 new small “Express” stores in unserved regions and invest more in its online shopping capabilities.
Toys R Us seeks ?120m lifeline as survival battle intensifies

$2.2bn: The amount that the US parent company of Toys R Us gained access to from a JP Morgan-led consortium in September

Credit:
 PETER NICHOLLS/ REUTERS
Turnaround specialists were this weekend poring over Toys R Us finances to decide whether the chain can be saved.
One financier told The Sunday Telegraph his firm had ruled it out because of the high upfront cost of the plans and the risk of being crushed by competition.
Toys R Us came to the UK from the US in the mid-Eighties as a pioneer of big out-of-town stores.
In recent years it has struggled in a fight on two fronts, as supermarkets expanded beyond selling groceries, and Amazon undercut its prices online. The chain’s UK operations have made a loss for seven of the last eight years.
Fears over its fate are mounting. Sources said Toys R Us was likely to collapse within weeks without a major cash injection.
The chain nearly failed to secure approval to close stores before Christmas, as tense negotiations with the Pension Protection Fund went down to the wire. The pensions lifeboat ultimately supported the restructuring plan, along with 98pc of creditors, after Toys R Us agreed to pay ?9.8m into its pension plan over the next three years to plug a deficit.
Toys R Us representatives could not be reached for comment.
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