Toys R Us suppliers concerned over payment

Published on: 19th March 2018

Accountants and hedge funds also look into £580m offshore loan.

When Toys R Us secured a $3.1b bankruptcy loan in September, toy companies were reassured they would be paid for goods delivered to the company as it tried to emerge from Chapter 11.

At last Thursday’s court hearing, vendor lawyers said they were receiving hourly calls from clients concerning hundreds of millions of dollars of claims. Whether or not they receive payment will depend on the outcome of the liquidation proceedings.

Learning Resources chief executive Rick Woldenberg told Reuters: “Doing business with a company in Chapter 11 was not supposed to be a ‘gotcha’ situation, but apparently in this case it was.” His company is owed more than $1m by Toys R Us.

MGA’s Isaac Larian was quoted in the same article: “We have a $14-$15m payment that hasn’t been paid. If I was a guessing man, I wouldn’t think I’d get all of it back.”

Among those that could pick up toy market share following the demise of Toys R Us include big-box retailers Walmart and Target; chains such as JC Penney, Kohls and Bed Bath & Beyond; drugstores like CVS Health and Rite Aid and discount outlets such as Dollar General or TJ Maxx.

In other news, accountants and hedge funds are said to be in pursuit of more than £580m that was funnelled out of Toys R Us’s UK business into a tax haven on the British Virgin Island just months before it went into liquidation.
Administrator Moorfields Corporate Recovery is preparing for a full investigation of Toys R Us’s financial affairs and has said the investigation will include determining why Toys R Us funnelled the loan into an offshore subsidiary and then waived repayments.

The Mail has claimed that US hedge fund Blue Mountain Capital is chasing the money as a way of making up for losses it suffered after the collapse of the American arm of Toys R Us. If it proves successful, the hedge fund could get its hands on the cash ahead of UK creditors or the administrator.

The loans first appeared in company accounts in January 2017, as sums of £92.5m plus interest, and £461.4m plus £25.6m to TRU (BVI) Finance II.

It states that these payments were waived – suggesting the money handed to the British Virgin Islands and the interest that should have been paid by the company to the UK, had been given up on.

A spokesperson for Toys R Us commented: “These were non-cash transactions between the UK holding company and its wholly owned subsidiary in the BVI. They had no impact on the financial position of the UK trading company and the move was part of a broader effort to simplify the UK group structure.”


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