Toys “R” Us filed for Chapter 11 bankruptcy on September 18, 2017. The toy retailer seeks to reorganize its debt load, which at the time of filing totaled over $5 billion.
Vendors have resumed shipping big-name products to the stores and the shelves are now stocked. Toys “R” Us will be open for the holiday shopping season! A few smaller toymakers have chosen to discontinue shipments at this time, but larger toy companies have chosen to continue their relationship with Toys “R’ Us as the bankruptcy case moves forward.
Toys “R” Us is among the dozens of brick-and-mortar retailer chains that have struggled under high debt as more consumers turn to online retailers like Amazon. Major toymakers Hasbro and Jakks Pacific warned that Toys “R” Us’ bankruptcy filing with hurt their business this year as well.
How Chapter 11 Can Help Save a Company
Chapter 11 bankruptcy is designed for businesses seeking to restructure and create a repayment plan to pay back its debts over time. In this way, Chapter 11 works similarly to Chapter 13 but is specifically for businesses instead of individual consumers.
Chapter 11 has the power to help a company avoid liquidation and having to shut down completely. It creates an opportunity for a company to become solvent again. Further, Chapter 11 plans provide for payments to be made to creditors. Companies who have done business with a company who enters into Chapter 11 can have debts owed to them paid as part of the Chapter 11 bankruptcy plan.
It is not uncommon for Chapter 11 bankruptcy filings to save a company. A number of well known corporations have sought the protections and benefits of Chapter 11 bankruptcy. For example, Chrysler filed in 2009 and American Airlines in 2012. If you’re interested in learning more about business bankruptcy, Business Insider compiled an interesting review of The 11 Largest Bankruptcies In American History.
The Future of Toys “R” Us
If Toys “R” Us will have a successful bankruptcy and ultimately make a comeback is an unknown. If its Chapter 11 bankruptcy plan fails, then it may convert to a Chapter 7 liquidation bankruptcy. This outcome would shut the toy giant down. But there is hope that the chain will be able to restructure under bankruptcy protection!
The good news: currently Toys “R” Us is keeping their doors open. They will remain open for the foreseeable future and through the 2017 holiday season.
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