Toys R Us debt deepens decline as news reports infer bankruptcy

Published on: 18th September 2017

Bonds backing Toys R Us renewed their recent dramatic slide on Friday.

As a measure of the sell-off of the bonds, the company’s most pressing maturity—a $208m issue of senior unsecured notes due in 2018—has halved in value over the past two weeks.

The bonds traded at just 46 cents on the dollar on Friday, down from around 65 on Thursday and a drop of 51 points (from 97) two weeks ago, prior to the debt restructuring announcement.

Several news stories are said to be behind Friday’s decline. Debtwire reported that Toys R Us has retained Prime Clerk, a bankruptcy claims and noticing agent, while Bloomberg followed Debtwire with reports that the company’s vendors have scaled back shipments on heightened bankruptcy fears.

The Toys R Us loan due April 2020 was quoted at a 63.875 bid on Friday, down two points from the last session, and a fresh low for the year. The paper has dropped more than 10 points since the start of the month.

Initial expectations had pointed to a potential distressed exchange for the 2018 notes, given that the fall in bond prices would facilitate a take-out at a much more favourable price. However, because of the negative price action, sources have suggested that bankruptcy in the form of a pre-pack is looking increasingly possible.


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