Richmond, VA — Toys “R” Us, Inc. filed for protection under chapter 11 of the Bankruptcy Code in Richmond, Virginia Tuesday, as the toy retailer struggled to reorganize its debt.

The 69-year old company has amassed a $5 billion debt that came from slashing prices, signing major, exclusive licensing deals with toymakers and buying up other toy giants FAO Schwartz and KB Toys over the past decade.

At one point, Toys ‘R’ Us showed signs of a turnaround. After being taken private in 2005, Toys ‘R’ Us filed for an initial public stock offering in 2010. It ultimately withdrew its filing, citing “unfavorable market conditions.”

Late Monday, Toys ‘R’ Us announced that it had raised $3 billion in bankruptcy financing, which it plans to use to restructure the company, alleviate its debt burden and revamp its stores.

The bankruptcy filing comes just ahead of the holiday season, the busiest time for the year for Toys ‘R’ Us. The company said it plans on keeping its 1,600 Toys ‘R’ Us and Babies ‘R’ Us stores open across the world, though the Wall Street Journal reported that the company will eventually close some of its underperforming locations as part of the bankruptcy process.

Toys ‘R’ Us noted in a press release that “the vast majority” of its stores are profitable. But the trend line is pointing in the wrong direction. The company reported that same-store sales fell by more than 4% last quarter, losing $164 million.

Bankruptcy petitions were also filed by affiliates of Toys R Us including:

17-34665 Toys “R” Us, Inc.
17-34660 Geoffrey Holdings, LLC
17-34666 Geoffrey International, LLC
17-34667 Geoffrey, LLC
17-34661 Giraffe Holdings, LLC
17-34662 Giraffe Junior Holdings, LLC
17-34663 MAP 2005 Real Estate, LLC
17-34664 Toys “R” Us – Value, Inc.
17-34668 Toys R Us (Canada) Ltd./Toys R Us (Canada) Ltee
17-34669 Toys “R” Us – Delaware Inc.
17-34672 Toys Acquisition, LLC
17-34671 Toys “R” Us Property Company II, LLC
17-34674 TRU Guam, LLC
17-34676 TRU of Puerto Rico, Inc.
17-34677 TRU Taj (Europe) Holdings, LLC
17-34678 TRU Taj Finance, Inc.
17-34679 TRU Taj Holdings 1, LLC
17-34680 TRU Taj Holdings 2 Limited
17-34681 TRU Taj Holdings 3, LLC
17-34682 TRU Taj LLC
17-34659 TRU-SVC, Inc.
17-34683 Wayne Real Estate Parent Company, LLC
17-34673 TRU Asia, LLC
17-34675 TRU Mobility, LLC
17-34670 Toys “R” Us Europe, LLC

Toys R Us seeks these cases to be jointly administered under its chapter 11 case numbered 17-34665-KLP. The bankruptcy case is to be presided over by Judge Keith Phillips. Proposed counsel for Toys R Us is the law firm of Kirkland & Ellis LLP.

The hearings on the Toys R Us first day motions are scheduled for September 19, 2017 at 11:00 a.m. in the courtroom of Judge Phillips located in the U.S. Bankruptcy Court, U. S. Courthouse, 701 E. Broad St., Room 5100, Richmond, VA 23219.

The bankruptcy of Sports Authority has been looming since January, when the company disclosed that it had missed a $20 million debt payment.

The store closings will take place over the next three months. The bankruptcy filing will allow it to break leases for money-losing stores. As part of the restructuring, the Company has identified approximately 140-171 stores, including seven in Arizona and two distribution centers, in Denver and Chicago, that it intends to close or sell in the coming months.

The company has arranged to borrow up to $595 million to fund its operations while in bankruptcy. But to pay off that loan and come out of bankruptcy, it likely will have to find a buyer for the remaining stores.

When the company was bought by a hedge fund 10 years ago, it was the largest sporting goods retailer. But it has struggled with the debt load associated with a leveraged buyout a decade ago. It has been overtaken by Dick’s Sporting Goods, which has grown by providing a more high end shopping experience.

It has been an interesting ride for Sports Authority since it was acquired in 2006 by private equity firm Leonard Green & Partners for $1.3 billion. As the realities of the retail sector fluctuate, bricks-and-mortar legacy chains such as Sports Authority have the choice of adapting or dying off. Today, there are reports that the company is considering selling stores and assets to Dick’s Sporting Goods, according to a Reuters report.

The company has 14,500 full- and part-time employees at its 450 stores and its offices, according to the bankruptcy filing. Nearly two-thirds of those workers are part-time. It also disclosed more than $1 billion in liabilities and assets valued between $500,000 and $1 billion.

Sports Authority is just the latest retail giant to fall on hard times as more and more shopping moves online.

Sports Authority spends $6 million a year to have its name on the stadium that is home to the Denver Broncos, which just won the Super Bowl. Whether that 25-year naming rights deal will continue under the bankruptcy is unclear.

“This was a tough decision to make, but we believe it was a necessary step in our plan to make Sports Authority an even better partner for our customers,” said CEO Michael Foss. To read full message from CEO click here.

To see Sports Authority closure list. The attached list shows 171 store closures. The official number coming from Sports Authority to the public is 140 store closures.

A&G Realty Partners of Chicago has been commissioned to auction 87 stores leases. To see their Marketing Brochure click here.  We were told an auction for the real estate will likely take place on or about the middle of April. Bids are currently being accepted.