Toys "R" Us Bankruptcy Hurts More Than We Know - ATL Law 404-800-4001
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Toys “R” Us Bankruptcy Hurts More Than We Know
This past Christmas, 268,000 less toys made it into the hands of Atlanta’s children. And no, Santa didn’t have more kids on his naughty list this year. But rather the charity responsible for distributing toys to low-income households “Toys for Tots” saw a major decrease in the amount of money and toys donated this past holiday season, this has a direct correlation to their bankruptcy. One of the predominant reasons stems from the decline of toys on the market after the decline of major toy retailer Toys “R” Us.
On September 18th, 2017, Toys “R” Us filed for Chapter 11 bankruptcy in an attempt to restructure its assets and reemerge with cutting-edge, interactive stores that would hopefully entice families to return. This, however, wasn’t enough to remove the albatross from Geoffrey the Giraffe’s long neck with the company announcing merely six months later that they were closing all of their US stores and liquidating all of their assets (including Geoffrey).
Toys “R” Us’ bankruptcy failed due to a variety of factors. The company took on an unbearable debt of about $5 billion when it was bought out by private equity firms KKR, Bain Capital, and Vorando Reality Trust in 2005. In addition, filing for bankruptcy in September—just prior to the holiday-shopping season—scared consumers. These combined with Toys “R” Us’ inability to compete with Walmart’s, Target’s, and Amazon’s loss-leading prices and two-day shipping made for a disastrous post-bankruptcy resurgence.
And considering “Toys for Tots” received (on-average) $5 million in donations and 3 million toys from Toys “R” Us, it is no surprise the charity took a major hit after the liquidation. For example, in Orlando, the Associated Press reported toy donations were down 25% from last Christmas. And the organization is expected to take an even greater hit in 2019. But this isn’t getting the people at “Toys for Tots” down. They are expanding the roles of other corporate sponsors such as Hasbro, Walt Disney Co., and Build-A-Bear to make up the slack.
This past October, the top lenders of Toys “R” Us announced they were cancelling the bankruptcy auction of its brand name and other intellectual property assets. They are planning another revival by establishing Toys “R” Us and Babies “R” Us branded companies as well as inflating their global market. According to the company, the bids didn’t provide a greater “probable economic recovery” to creditors and stakeholders than the projections of the new revival plan.
Toys “R” Us hopes to come out of their Chapter 11 bankruptcy and liquidation a stronger and more modern company. And in doing so, they might also revive “Toys for Tots” and the joy they bring every Christmas.
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