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Businesses The Almighty Buck United States

Toys R Us Cancels Bankruptcy Auction, Plans To Revive Brand (theglobeandmail.com) 87

Posted by BeauHD from the near-death-experiences dept.
Toys "R" Us may not be dead after all. According to Reuters, "The top lenders of Toys "R" Us have decided to cancel the bankruptcy auction of its brand name and other intellectual property assets and instead plan to revive the Toys "R" Us and Babies "R" Us brand names." From the report: The bankrupt retailer's debtors aim to open a new Toys "R" Us and Babies "R" Us branding company that maintains existing global license agreements and can invest and develop new retail shops. The lenders also plan to expand its international presence and further develop its private brands business. The bids were not superior to the plan to revive the brand as it did not offer "probable economic recovery" to creditors as well as benefits to stakeholders who would maintain the brands under the new independent U.S. business, the court filing showed. Under the intellectual property auction, the company had planned to sell its assets, including the brand names of Toys "R" Us, Babies "R" Us, registry lists, website domains, Geoffrey the Giraffe and other assets. The company filed for bankruptcy protection in September last year, but later said it would sell or close all 800 of its U.S. stores.
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Toys R Us Cancels Bankruptcy Auction, Plans To Revive Brand More

Toys R Us Cancels Bankruptcy Auction, Plans To Revive Brand

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  • Ah yeah! (Score:1)

    by Anonymous Coward

    I don't have to grow up!

  • That was the plan all along. (Score:5, Insightful)

    by Blinkin1200 ( 917437 ) on Wednesday October 03, 2018 @08:38PM (#57421986)

    Get rid of all the the 'problems' and start over.

    The Halloween stores in my area are going to be disappointed.

    • for Hostess it was Unions and Pensions. Toys R Us' rank & file didn't have those things. Maybe somebody in their supply chain did? Or maybe it let them clean out the old, older management without an age discrimination suit. I don't think it wipes the debt, does it?

      Anyone know enough about financial shenanigans to know?

      • well when you attend trump u you too can learn all about how to make big $$$ when you file for bankruptcy and you don't even have to give up your home or car.

        • well when you attend trump u you too can learn all about how to make big $$$ when you file for bankruptcy and you don't even have to give up your home or car.

          The whole point of bankruptcy is so you can escape crushing debt without having to give up any hope of making a livelihood or of having any place to live. That's why civilized countries created the concept of bankruptcy.

          I mean, if you think debtor's prisons and workhouses were better, OK, but I don't agree.

      • Old buildings that needed too much maintenance or renovations to upkeep. Most Toys R Us stores in Silicon Valley were 30+ years old and the buildings sat on prime real estate. Developers would love to build more luxury housing at these locations.
      • The creditors wanted to erase the debtors from the leveraged buy out [latimes.com]. I'm not sure if they get to erase the books of the suppliers as well, but that'd be a pretty neat trick...

        • The debt and problems started well before (Score:5, Interesting)

          by raymorris ( 2726007 ) on Wednesday October 03, 2018 @09:57PM (#57422268) Journal

          That article acts as though the problems started ten to fifteen years later than they really did.

          For a long time, Toys R Us was the #1 toy retailer in the US. It was the first big box toy store, and the only one in many cities. They "kept doing what has been successful" (rested on their laurels) as other competitors emerged. In the early 1990s Target and especially Walmart starting taking a big chunk of that market. The aging Toys R Us stores didn't attract customers, who could get the same toys at Walmart while doing their weekly shopping.

          By 1998, Walmart sold more toys than Toys R Us. The internet was also eating a growing chunk of the market.

          In 2000, the company hired CEO John Eyler to reinvigorate the company. Eyler decided the way forward was to remodel all the stores and open new, bigger stores. They spent and borrowed a lot of money to do that. They had already been having financial difficulties in the 1990s, then Eyler added more debt, which mean lahe debt payments. The company started losing money faster.

          By 2005, the strategies were very obviously not working. Yet they did have a very recognizable brand. Some private investors thought they could salvage the company by more effective management. That's where the LA Times article picks up the story. Unfortunately for the private investors, 2005 was a very bad time to invest in struggling brick and mortar retailer with no signifocant online presence. That's the year Amazon introduced Amazon Prime, with free two-day shipping. The next year, Amazon launched Fulfillment by Amazon, which had thousands of retailers selling through Amazon.com. Amazon beat Toys R Us handily.

          • By 2005, the strategies were very obviously not working. Yet they did have a very recognizable brand. Some private investors thought they could salvage the company by more effective management. That's where the LA Times article picks up the story. Unfortunately for the private investors, 2005 was a very bad time to invest in struggling brick and mortar retailer with no signifocant online presence. That's the year Amazon introduced Amazon Prime, with free two-day shipping. The next year, Amazon launched Fulfillment by Amazon, which had thousands of retailers selling through Amazon.com. Amazon beat Toys R Us handily.

            Wrong.

            The problem was Bain Capital and a leveraged buy out that added the $6.2B in debt buying itself out. (For those who don't know, a leveraged buy out is where you use an asset as leverage to get a loan. IN this case, Bain Capital needed $6B to buy TRU. So what asset did they use? Well, TRU! Thus they bought TRU using a loan backed by the company itself. ).

            They had an online presence. In fact, they were among the first stores to actually have a website, and while it's not as slick as Amazon was, they were holding their own.

            2005 might have been a bad time, but they weathered through it, which means it's not the financial crisis that did them in. It's the debt - $6.2B is a lot of debt that corporate raiders added to them. They struggled, but their cashflow was enough to pay off their obligations, until 2015-2016 when they didn't make enough money to cover their obligations. Things spiraled from there.

            "Private investors" my ass. It was Bain Capital and leveraged buy outs that did them in. Their numbers reflect this. You only call it "private investors" as a way to dodge the truth of the "investment".

            Amazon, Wal-Mart, and Target were all competitors, and yet they still managed. The only reason right now they can think of revival is after Bain Capital left and got the real investors screwed over. But once they got paid out, hey, no more crushing debt. Then again, those investors pretty much should've known they were buying into a Bain Capital investment.

            Anyhow, it's all screwy, because you know who else owns the name? A bunch of financial investors in Canada who bought over the Canadian operations and still run it today. And you can bet they likely want their share of the US operations (TRU Canada loaned TRU corporate a bunch of money that actually put TRU Canada in trouble in 2015-2016 because TRU corporate defaulted. Except TRU Canada came out of it thanks to good revenue).

            • Re: (Score:1)

              by Anonymous Coward

              The only disagreement I have with your write-up is that while they did have an online presence, they /really/ didn't have one. Early on, they didn't trust the internet, and didn't think it was a valid way to increase sales. They actually out-sourced their website and online sales to .... Amazon! The original agreement was that Amazon was going to promote the Toys-R-Us brand on their website and would drive people to Toys-R-Us hosted merchandise. That really only happened for a short while -- and eventua

            • Had to close hundreds of stores in 2004 (Score:5, Interesting)

              by raymorris ( 2726007 ) on Thursday October 04, 2018 @07:23AM (#57423768) Journal

              There's the political narrative, and then there's history.

              Here's an article about the failure of Toys R Us from 2004
              https://www.nytimes.com/2004/0... [nytimes.com]

              Eyler's strategy to fix their "running out of money" problem was - spend a ton more money. He had come from FAO Swhartz, which went bankrupt twice. He would have been a good choice if you wanted someone to show you how to go bankrupt.

              > Amazon, Wal-Mart, and Target were all competitors, and yet they still managed

              Amazon, Walmart, and Target operate toy specialty stores? You know the actual competitors are in that space? KB Toys, FAO Swhartz, all the toy store chains are gone, because that model doesn't work.

              Yes, when you get a loan to buy a house, the house is collateral - the bank will take the house if you don't make the payments. When you get a loan to buy a car, the car is collateral - the bank will take the car if you don't make the payments. When you get a loan to buy a struggling specialty retailer ...

      • Re: (Score:2, Informative)

        by Anonymous Coward

        They were bained:
        http://theweek.com/articles/761124/how-vulture-capitalists-ate-toys-r

        Bain Capital bought Toys R Us with borrowed money. They then made Toys R Us pay back the loan and interest plus pay them huge "management" fees. Bain made a lot of money off the management fees. Toys R Us and the creditors got screwed.

        Before Bain bought them they had $2 billion in the bank. They weren't making huge profits, but they were making a profit. Toys R Us wouldn't have gone bankrupt if Bain hadn't bought them.

      • Re: (Score:3)

        by sjames ( 1099 )

        Hostess was mis-management, including an 80% raise for the entire C level the year before. The union trouble only started when the union worked out that the concessions they were being asked for would be hoovered out of the dying company, which would still die.

        When a company blames pensions, usually what they actually mean is that the pension funds which were supposed to be prudently invested so they would be sufficient to cover pension were instead plundered and now there's not enough to cover it.

        It's the

        • Indeed. Some people always have a knee jerk reaction to blame the unions. In most cases of these troubled companies the unions did make big concessions already, only to see 20-30% of the money the workers give up go directly into bigger C-level bonuses. So when management comes around a second or third(!) time and says "you need to give up even more, and it looks like those pensions that should already be paid for don't exist -- your fault for not giving up more earlier" it should be no surprise that an

      • Some people blamed Amazon but that wasn't the cause.

        Part of the problem was that it tied up stock with toys that no one wanted -- such as The Last Jedi.

        THE biggest problem was that it was saddled with *Billions* of dollars in debt. Namely $5.2 Billion and negative equity of $1.3 Billion. While Microsoft can dump $2 Billion into the XBox or BING program until it is profitable Toys R Us didn't have the capital to do that.

        TL:DR;

        * Huge debt
        * Couldn't pay interest
        * Declining sales
        * Bad management
        * Got bought b

        • Amazon is a factor in the equation though. A lot of the debt and influx of money went into growth. Competition with Amazon may had slowed down the profit from growth, so they couldn't pay the interest.

          With Amazon nearly a click away, I actually think Toys R Us keeping with the retail stores may have been a better investment, it is nearly impossible for a company to go head to head online with Amazon. Investing into an online presence may had been a total waste of money.

          • Re: (Score:1)

            by Anonymous Coward

            Amazon wasn't that big of a factor and is only gaining ground because the entire industry is a mess on the retail side. This is an industry where look and feel, something that is next to impossible to accurately convey online, is a dominant factor in sales. The negative reviews on Amazon are absolutely hilarious - people spend $20 on a $5 toy from 10 years ago and complain that it is much smaller than they expected based on the price. Even with accurate pics and specs (not necessarily the norm), people stil

      • Re: (Score:1)

        by Uberbah ( 647458 )

        for Hostess it was Unions and Pensions.

        The unions that accepted cut after cut after cut after cut after cut in pay and benefits, only to say "no mas" when it was clear the money was being Hoovered out for venture capitalists? GTFO, fascist.

      • In short Toys R Us borrowed a lot of money to expand. When it was time to pay off their debt they hadn't grown as much as they hoped too. So they couldn't pay their debt. A good simple you tube explanation on it [youtu.be]
        Not so much Evil corporate underhanded activities. They took a risk, and it backfired.

      • Yup... just what I was thinking. Another "zombie" company; filing for bankruptcy but not actually changing anything except screwing somebody out of some legitimately owed debt, like GM getting out of having to pay back the pension funds previous CEOs raided like it was their personal piggy bank.

        Toys R Us, etc wouldn't have to worry that much about age discrimination lawsuits, I suspect; from what I saw, a large number of their store help were already retirees working for minimum wage.

        mnem
        Yey Geoffrey the G

      • The real financial problems were caused by the LBO in 2005. KKR and Bain Capital (Mitt Romney's former company) bought out Toys R Us for $6.6B and assumed $1B debt. The way the buyout was structured Toys R Us had to acquire $6.3B in debt. For those that don't know, most LBOs are structured so that the company being bought has to take on the debt. It is perfectly legal.

        Many people would assume that the company merely lost out to Amazon but that's not the whole story. With $6.3B in debt, the company was sever

    • Get rid of all the the 'problems' and start over.

      The Halloween stores in my area are going to be disappointed.

      My wife says this is the most genius thing she's seen in ages.

  • The news on the massive Toys R Us data breach from abandoned employee information in a defunct store didn't go anywhere because who's going to get sued?

    Looks like Toys R Us is opening the door back up to litigation.

    • It was whoever worked for the store. We're talking about 100, 200 people max?

  • We have seen this before. Companies become some kind of generic clearinghouse with the face of an old brand.

    Examples include CompUSA, Circuit City, Polaroid

  • Maybe my bonus points will still be good.

  • Don't donate to planned parenthood this time.

    • Political BS: OFF
      A lot of Babies R Us sales are from Grand parents and other family members getting stuff for Baby Showers. Planned Child Birth allows for longer term planning and normally greater family involvement in the process, thus more sales.
      Vs. Someone who accidentally got pregnant with some jerk. And half of her family has sunned her for her mistake.

      Political BS: ON
      I don't want to see abortions I believe it is akin to murder. However we need to make conditions where someone would want or need to ha

      • Marketing or Politics wise, giving money to an organization who's primary purpose is killing children is not a plus. People who are buying for a little one don't want to think about them being killed.

  • If they go through this and I still have to grow up, some fuckers ARE GONNA DIE!

  • toyr r us was doing fine until people bought the brand with basically a ton of loans. so of course all that debt became the company's debt. leveraged buyouts never work. going bankrupt and rebooting the brand deletes that debt.
  • *Plays Michael Jacksons Thriller*

    *dances like a zombie*
  • I always assumed that the idea was to sell the brand names to someone who would then license that brand name to companies like those operating the Toys 'R Us stores in Europe. Actual stores and inventory that hasn't already been liquidated is obviously going to be auctioned off as planned and thus the only change to the plan is that it's the creditors themselves, or more specifically a company set up by them for this purpose, who are going to be licensing out the name rather than somebody else.

    If this go
    • I would expect a concept change, they were already trying to have more community event type stuff, birthday celebrations, etc. Probably something with a smaller footprint, or at least less inventory, and places to play around with the new items, and a web order pickup, like what Best Buy has become. I still think Sears missed an opportunity to become something like that, but the last time I was in there the employees were quite literally surprised someone was trying to buy something instead of passing thr

  • Just stop wasting money on buying all that Star Wars garbage. You'll do OK this time.

  • Toys R Us didn't die because of financial mismanagement or poor sales. It was bought by investors, who borrowed a lot of money to complete the sale, and then made Toys R Us pay back the loans. The downturn of 2008 was just too much The creditors kind of got what they had coming, agreeing to such a highly leveraged deal.

    These creditors then dug their hole deeper by deciding to sell off the real estate used for the stores...before finally coming to their senses and realizing they were throwing something valua

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