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Toys R Us Files for Bankruptcy Protection Right Before Holiday Season

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Toys R Us Files for Bankruptcy Protection Right Before Holiday Season

Toys R Us, the New Jersey-based toy retailer has filed for chapter 11 bankruptcy protection.  The bankruptcy filing helps relieve itself of the debt left over from its $6.6 billion acquisition by Kohlberg Kravis Roberts, Bain Capital Partners and real estate investment trust Vornado Realty Trust in a 2005.

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The retailer has $4.9 billion in debt, $400 million of which has interest payments due in 2018 and $1.7 billion of which is due in 2019.

“Today marks the dawn of a new era at Toys”R”Us where we expect that the financial constraints that have held us back will be addressed in a lasting and effective way,” said Dave Brandon, the company’s chairman and CEO, said in a release announcing the filing.

What Went Wrong

Over the last 5+ years, Walmart has been beating up the toy retailer with aggressive pricing on the most popular items during holiday seasons.  Combined with Amazon’s growth, this one-two punch has pushed the retailer into bankruptcy.  Toys “R” Us tried to beat Amazon and Walmart at their own games. Unfortunately, It hasn’t worked.

Toys R Us said it will continue to operate its approximately 1,600 Toys R Us and Babies R Us stores around the world.

Restructuring debt provides Toys R Us the financial flexibility to continue its turnaround.  Improvements to its website and its Babies R Us business is on the agenda. The company hopes to focus on items like cribs that are less likely than diapers to be sold on Amazon.

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