Toys R Us Intends On Paying Vendors

Last Updated on December 23, 2019 by Danielle

Toys R Us

At its bankruptcy court hearing, Toys R Us announced it is ‘making every effort’ to pay its suppliers and vendors.

In its bankruptcy court hearing in U.S. Bankruptcy Court before Judge Keith Phillips, Toys R Us stated it is ‘making every effort’ to pay its suppliers and vendors. Toys R Us announced it will soon be liquidating 735 toy stores from its chain in the United States, which will impact many stakeholders, including suppliers, vendors, and 33,000 U.S. employees.

However, the proceedings aren’t going as smoothly as planned, as over 50 suppliers including big toymakers Mattel and LEGO have raised objections.

The problem is Toys R Us is rapidly running out of cash and owes several companies millions of dollars. It is still in the process of seeking a buyer for its Canadian, European, and Asian businesses, which are still doing good business. Suppliers and vendors have every right to be concerned about whether they will be fairly compensated.

A handful of trade vendors are urging Toys R Us to return unpaid inventory instead of selling it at their cost. On the other hand, Toys R Us wants to ensure it has sufficient inventory for its patrons for its going out of business sales. Bear in mind, Toys R Us would be most likely discounting merchandise during the liquidation process. This is a simple matter of what is fair and equitable.

Lazard’s David Kurtz, Toys R Us’s advisor, testified at U.S. Bankruptcy Court: “We’re making every effort to make sure (trade vendors) will be paid in full.”

Presently, it is looking for approval on a March 26th deadline for bids on its foreign business and an auction to be held on March 29th.

Additionally, Toys R Us is looking to be granted approval on a series of U.S. liquidation procedures which would in effect cease over $450 million worth of supplier payments. Reportedly, this plan raises a red flag, as it may potentially force many small toymakers to go out of business as well.

Hundreds of companies – both big and small – partnered with Toys R Us, as it was a huge showcase for everything from classics to new innovative toys and everything in between.

With established trade contracts, vendors were required to send goods to Toys R Us in exchange for an unsecured trade credit. Therein lies the problem. Companies were required to send merchandise to Toys R Us without first paying for it in full, and now many companies are concerned about being paid for only a portion – or, in the worst case, none – of the merchandise. A promise is one thing, but delivering on that promise is a whole different ball game.

Lego filed a court grievance stating: Toys R Us’s “wind-down must be implemented in a manner that is fair and equitable to all,” directly addressing Toys R Us’s creditors. Additionally, the U.S. Trustee, a bankruptcy watchdog, has also raised objections, expressing concerns over some of the procedures and relief proposed in the liquidation.

We’ll keep a close eye on whether Toys R Us holds true to its word, as it brings its US operations to a close. What do our readers think about the trade arrangements? Do you think Toys R Us should return unpaid merchandise or sell it at discounted prices? Sound off in the comments below. We’d love to hear from you!

Source: Reuters

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