Employees have been given a 60 day notice to employment termination, which means that they will at least be paid for 60 more days (regardless of whether or not the stores will remain open for 2 more months).
It is unsure if gift cards will be honoured since it is not part of the instructions but it is being urged by state governors.
What is part of instructions though, is the description of a deal Toys R Us is currently in the middle of. While a liquidation must happen, it is simultaneously working on a deal to sell 200 US stores along with their entire Canadian operations (which is a very hot commodity right now) to a some interested parties.
While the US operations are unatractive to investors, the lack of competition in Canada and overal better managed stores, have made those stores very profitable (to the point of having a surplus which went towards repaying debt owed by the US operations) and that has attracted several investors. So Toys R Us might survive afterall, but it would be a smaller company and a predominantly Canadian one. We have included the most important part of the 124 page document below, which illustrates this plan, but you can read the entire file here.
In the face of these extraordinary circumstances, further waivers of covenant
defaults are unobtainable. The B-4 lenders—the primary economic stakeholders with respect to
the U.S. collateral—have determined that the best way to maximize their recoveries is to liquidate
the existing inventory in all of the Debtors’ 735 remaining U.S. stores and begin an orderly
wind-down of the U.S. operations. To be clear, the Debtors are not precluding the prospect of any
going concern option for U.S. stores.
In fact, the Debtors have developed a potentially
value-maximizing transaction that would combine up to 200 of the top-performing U.S. stores
(primarily those operating under the side-by-side format similar to the stores operating in Canada) with a going-concern transaction for their Canadian operations. The Debtors are currently
engaged with certain interested parties, including the B-4 Lenders, regarding this transaction and
are hopeful that such a transaction can develop as part of the sale of their Canadian
operations
But because time is of the essence to mitigate losses and maximize recoveries to U.S.
stakeholders, the Debtors regrettably must move forward with implementing a wind-down while
simultaneously pursuing a going-concern transaction tied to Canadian operations.
Accordingly, by this Motion, the Debtors are taking the prudent and responsible
step of seeking authority to begin an immediate and orderly liquidation of their U.S. business and
to sell the Debtors’ equity interest in the Canadian operations.
In short, there is too much of an interest by investors to close Toys R Us Canada, which will instead be sold. What is unknown now is if the buyer will only buy the Canadian operations or also buy 200 US stores as part of the bundle. If that works out, and Canadian practices are applied to those 200 US stores, what you see below may be found in the US as well one day.
