Toys R Us Unable to Survive Chapter 11 Bankruptcy
Closing all Nevada and U.S. Stores
On Friday, June 29, 2018, the end of a legacy in the toy industry will close its doors for the final time. After 70 years in business, Toys R Us will be no more. Unfortunately, the company was unable to survive through Chapter 11 bankruptcy. Despite a last ditch effort in September 2017, the toy chain was unable to reorganize its debts in a Chapter 11 Bankruptcy to keep its doors open. Despite seeking debt relief, the stores will still close.
A Brief Description of Chapter 11 Bankruptcy
While individual filers typically file either a Chapter 7 Bankruptcy or a Chapter 13 Bankruptcy, businesses have the option between Chapter 7 and Chapter 11. In a Chapter 11 Bankruptcy, the struggling business cedes control of major company decisions but maintains decision-making authority over normal operations. This larger authority is given to a panel of the company’s top creditors. While the business is protected by the Automatic Stay of Bankruptcy, which freezes its assets to prevent creditors from seizing them, it will work out alternative payment with its creditors.
Toys R Us Didn’t Go Silently
Toys R Us did not go quietly as a valiant effort was made to survive Chapter 11 bankruptcy. Toys R Us was unable to capitalize on the holiday season and secure a company buyer to reorganize their debt. Once again, a good store and good people are feeling the effects of overwhelming debt. Unable to overcome, the toy giant will not continue business.
What Was the Company’s Alternative?
If Toys R Us hadn’t opted for a Chapter 11 Bankruptcy filing, the other choice would have been to file a Chapter 7 Bankruptcy. Unlike a Chapter 11 Bankruptcy, Chapter 7 for the most part requires no repayment of debts. Except in cases of fraud and insider payments, unsecured non priority debts are discharged and the debtor is no longer liable for them. The company would’ve been forced to surrender all of its assets and inventory, which would’ve been sold and contributed towards its debts. Other companies may have taken advantage of the opportunity to buy the company, but Toys R Us itself would have to close despite any possibility of profitability in the future.
Chapter 7 Bankruptcy in Las Vegas is more frequently utilized by smaller businesses where the company owner has personal liability for the business’ debts. Toys R Us was a large enough company to at least attempt to navigate the complicated process of a Chapter 11 Bankruptcy.
Market Competitors Took Advantage of Toys R Us’ Vulnerable Position
While Chapter 11 Bankruptcy can often help businesses restructure their business and reorganize their debt, Toys R Us simply acquired too much debt after going private in 2005. Competitors also turned very competitive when news of the Chapter 11 filing became public. Major stores such as Target, Walmart, and Amazon offered lower prices and shipping discounts throughout the holiday season. Toys R Us was unable to compete since they rely solely on the sale of toys. As more and more children use tablets and mobile apps as forms of entertainment, the less toys they will need and their parents will buy. When parents are shopping for toys, they are likely to use websites that offer other goods and services for convenience.
Other Companies are Stepping In to Fill the Void
All hope may not be lost for toy lovers. Reports have surfaced that a former CEO of the store is considering taking another shot at reviving the company. Party City has also announced they will try to fill the toy void and take advantage of the closure by opening pop up toy shops in many locations. In addition to these possibilities, retail giants like Amazon, Target, and Walmart will always be around with toys available for purchase. So while we will miss Geoffrey the Toys R Us giraffe, consumers will still have many options for their toy-buying needs despite the failure of Toys R Us’ Chapter 11 Bankruptcy filing. If you need help filing for bankruptcy in Las Vegas, contact The Law Office of Erik Severino.
The Law Office of Erik Severino
Vegas Bankruptcy Lawyers
7251 W Lake Mead Blvd
Las Vegas, NV 89128
Phone : (702) 879-9262