Toy and game retailer giant Toys R Us has hired a law firm to help reconstruct its roughly $400 million in debt that is due in 2018, a move that could include bankruptcy protection.
CNBC reports that the company currently owes $5 billion, $400 million of which is due by next year. Toys R Us has hired restructuring lawyers at Kirkland & Ellis to help address the looming payments. Options can be anything from bankruptcy filing to possibly raising enough finances to cover the money owed.
“As we previously discussed on our first quarter earnings call, Toys R Us is evaluating a range of alternatives to address our 2018 debt maturities, which may include the possibility of obtaining additional financing,” Toys R Us spokeswoman Amy von Walter said in a statement.
The company has already announced it is working with Lazard to help address its debt load, and it successfully refinanced some of its debt just a year ago. Still, it has become increasingly difficult for leveraged retailers to tap the refinancing market, as lenders have become spooked by the increasing number of retail bankruptcies.
According to Davidowitz, a lot of the company financial woes can be traced to the $6.6 billion sale of the company in 2005 to a group of investors including private equity giants KKR and Bain Capital and Vornado Realty Trust.
As a result of the billions in debt, Toys R Us was not able to make the investments it needed to compete with its rivals in areas such as online sales, he added. The company has struggled to boost web sales since then.