December 4, 2017

Another retailer, Toys “R” Us, sought Chapter 11 bankruptcy protection on September 18, 2017. The store joins a growing list of brick-and-mortar retailers that has succumbed to the pressures of long-term debt, which they listed at more than $5 billion.

The parent company owns Babies “R” Us and cited stiff competition from other big box stores, such as Walmart, and the online presence of Amazon, as a reason for their financial woes. However, the giant toy retailer could not overcome the mountain of debt — $6 billion — they incurred during a leveraged buyout in 2005. They submitted the paperwork in Richmond, Va., to the federal bankruptcy court.

The company needed to make a payment in 2018 of $400 million as part of their agreement. They sought independent counsel from a legal team in order to address these issues. A statement from the retailer indicated that they still hope to pursue growth over the long term.

Additional retailers that have filed bankruptcy in 2017 include rue 21, a teenage clothing store; Gymboree, a children’s clothing store; and Payless ShoeSource. Some companies have released tens of thousands of workers and closed thousands of stores in an effort to remain competitive in this market and to reduce costs. Babies “R” Us and Toys “R” Us stores number about 1,600 globally. The company has given no indication that they will close any of these.

Banks and lenders, including JPMorgan Chase, will back the retailer with $3 billion so that they can keep paying employees and suppliers. The company CEO released a statement that he hopes that the company can move forward as they address their financial problems by seeking bankruptcy protection.

Changing business and retail markets have affected brick-and-mortar businesses in the current retail climate. These effects from businesses can trickle down to individuals, impacting their income and standard of living. In other cases, people struggle with unforeseen medical bills that completely overwhelm them. In these situations and in business-related matters, Chapter 7 or Chapter 11 bankruptcy protection might offer you options and hope for the future. Contact our legal team today to find out how we can help.