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Toys R Us Told It Can Do What It Must to Sell Its Asian Assets

A Virginia bankruptcy court Thursday gave Toys R Us permission to offer bid protections or take whatever other actions it deems necessary to sell off its Asian assets.
U.S. Bankruptcy Judge Keith Phillips authorized the bankrupt toy chain to offer potential buyers of its Asian assets bid protections of up to 3 percent of the purchase price, a measure the company said was needed because the joint venture structure of its Asian business may be giving potential buyers cold feet.
"Without the bid protections, the debtors believe that certain interested parties will not submit final binding bids, thus limiting the competitiveness of the Asia sale process and potentially materially reducing the realizable value of the related assets," the company said in its motion.
The New Jersey-based children's toy chain and owner of Babies R Us filed for Chapter 11 protection in September with more than $5 billion in funded debt, stemming in large part from money its owners borrowed in 2005 to fund a $6.6 billion leveraged buyout of the company and take it private.
The company was reportedly preparing to liquidate its businesses in Australia, France, Poland, Portugal and Spain and to be seeking buyers for its stores in Canada, central Europe and Japan.
In its motion, Toys R Us said as of mid-May it had received multiple nonbinding bids for its Asian business operations.
However, Toys R Us said some buyers have been hesitant to commit because its Asian operations are actually a joint venture between its overseas subsidiary TRU Taj LLC and China-based Fung Retailing Ltd. Due to the potential complications posed by Fung's contractual rights, a number of parties have requested bid protections as a condition for submitting a binding offer, it said.
The company had also asked the court for express permission to take any other action needed to close the sale, including granting consents and giving instructions to affiliates.
"While the debtors do not believe they need such authority with respect to nondebtor affiliates, the debtors seek such relief out of an abundance of caution and to provide certainty to the Asia sale process," it said.
Counsel for Toys R Us declined to comment.
Last month, the company asked for permission for TRU Taj to enter into a new $80 million debtor-in-possession agreement, saying the insolvency of its Spanish branches and the potential insolvency of other international subsidiaries had put TRU Taj at risk of default under the previous DIP arrangement.
Toys R Us is represented by Edward O. Sassower, Joshua A. Sussberg, James H.M. Sprayregen, Anup Sathy, Chad J. Husnick and Emily E. Geier of Kirkland & Ellis LLP and Michael A. Condyles, Peter J. Barrett and Jeremy S. Williams of Kutak Rock LLP.
The case is In re: Toys R Us Inc. et al., case number 3:17-bk-34665, in the U.S. Bankruptcy Court for the Eastern District of Virginia.