Toys R Us has canceled plans to auction off its brand marks and intellectual property later this week, the fallen retail giant told a Virginia bankruptcy court Monday, indicating it will pursue a plan of reorganization that may shift the focus of the company toward its brand names.
The bankrupt retailer said in the filing that it received qualified bids for the Toys R Us and Babies R Us brands but that they were not likely to yield an alternative superior to the new reorganization plan.
The new plan, filed in September, is considering a new branding company, "that maintains existing global license agreements and can invest in and create new, domestic, retail operating businesses under the Toys R Us and Babies R Us names," according to Monday's filing.
In March, the bankrupt toy retailer announced its plan to close all of its 880 U.S. stores and file for liquidation, on the same day its U.K. branch announced it would close all 100 of its locations.
New Jersey-based Toys R Us filed for Chapter 11 protection in September 2016, 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 to take the company private.
The first Toys R Us was opened in 1957 by founder Charles Lazarus, and the company went public in 1978. Over time the company grew and expanded across the globe, launching Babies R Us in 1996 to sell goods for babies and toddlers.
In 2005, an investment group led by entities advised by or affiliated with Bain Capital Partners, KKR & Co. LP and Vornado Realty Trust bought Toys R Us for $6.6 billion. The company continued to expand after going private, ultimately growing to employ nearly 60,000 full-time and part-time employees.
The bankrupt retailer said in July it had reached a settlement with a group of its North American creditors — including its unsecured creditors and a noteholder group — that it said will head off potential legal battles between creditors while setting aside at least $180 million for the administrative claimholders.
Monday's filing said that the intellectual property auction is not likely to result in better outcomes as to "the probable economic recovery to creditors of the selling debtors' estates; and the benefits to other direct and indirect stakeholders of maintaining the Toys R Us and Babies R Us brands under a newly-established, independent U.S. business, including, without limitation, expected expansion of employment opportunities for workers and merchandising opportunities for toy and other vendors."
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.