Toys “R” Us hands over stake in $900m Asia unit to lenders

Toys "R" Us
Signage is displayed on the exterior of a Toys 'R' Us retail store in the Queens borough of New York, U.S. Photographer: Jeenah Moon/Bloomberg Photo by Bloomberg

Toys “R” Us Inc on Friday extended a lifeline to its Asian unit as it transferred its approximately 85 per cent stake in the business to its creditors.

The remaining 15 per cent of Toys “R” Us Asia is currently owned by Hong Kong-based Fung Retailing.

According to the Toys “R” Us announcement, Fung Retailing will acquire an additional 6 per cent stake from the noteholders of the US company in a deal that values the Asian unit at $900 million.

The transaction will make the Hong Kong-headquartered company the single largest shareholder in Toys “R” Us Asia with a 21 per cent stake. The remaining 79 per cent is held by investment funds and financial institutions that hold the US parent company’s senior secured notes.

“This transaction is a significant step in separating the valuable and growing Toys “R” Us Asia operation from the rest of the business. The Company’s growth prospects in Greater China, Japan and Southeast Asia are bright and we are excited about investing in and owning the Company in partnership with Fung Retailing,” a spokesperson for the noteholders said in a statement.

The Asian unit will continue to be led by its current president and CEO, Andre Javes. By the end of this year, it will operate over 450 stores with more than 10,000 employees in Japan, Greater China and Southeast Asia – including Brunei, China, Hong Kong, Malaysia, Singapore, Taiwan and Thailand – and license over 85 stores in the Philippines and Macau.

Toys “R” Us Inc filed for bankruptcy protection in September 2017 in the hopes of eking out a survival plan. However, it was pushed into liquidation after reporting disastrous holiday sales by hedge funds to whom it owed about $1 billion.

On Tuesday, a US judge signed off on a bankruptcy plan that handed over control of the brand to a group of hedge funds, which includes Angelo, Gordon & Co., Franklin Mutual Advisors, Highland Capital Management, Oaktree Capital Management and Solus Alternative Asset Management.

According to a Wall Street Journal report, the hedge funds wanted the Asian business to pay more for using the Toys “R” Us intellectual property. It is not immediately clear if the newly announced plans for Toys “R” Us Asia indicate an amicable resolution with the new owners.