By: O’Niel Barrington Blair
Toys “R” Us, the American toy store chain, has filed for bankruptcy protection in the U.S, and plans to file in Canada under the Companies Creditors Arrangement Act. The CCAA is a form of bankruptcy protection in Canada that a company can file for if they owe more than $5 million, according to PWC. Com.
The company is several billion dollars in debt. Toys “R” Us plans to restructure its business without interrupting the upcoming holiday season, they said in a press release.
“Together with our investors, our objective is to work with our debtholders and other creditors to restructure the $5 billion of long-term debt on our balance sheet,” said Dave Brandon, Chairman and Chief Executive Officer of Toys “R” Us.
Robert Cinapri, the Humber College program coordinator for business administration, said companies file for bankruptcy protection for different reasons. In the Toys “R” Us case the company said they are taking the time to restructure their company to pay back debtors.
Toys “R” Us has filed for Chapter 11, which temporarily freezes debts and pauses interest accumulation, said Cinapri.
“Essentially its taking a time out from the people they owe money to,” Cinapri said.
Toy stores are still profitable
Toys “R” Us said despite Chapter 11 filing its stores are profitable and others in the toy industry agree.
Kiyal Minhas, an employee of a toy store not affiliated with Toys “R” Us, said business has remained unchanged for them. Minhas said that her store is usually very busy, especially on the weekends.
“Weekends we are really busy you see people young and old,” Minhas said.
Cinapri said the economy shifts and in his opinion buyers are moving towards cheaper stores and online retailers such as Amazon.
“I’m surprised it took so long,” Cinapri said.
Actual bankruptcy said Cinapri, is a process where a company prepares severance packages for their employees, pays government taxes and finally liquidates assets to pay off creditors. Cinapri said it’s not unusual for American companies to pull out of Canada and still operate in America after claiming bankruptcy.
Currently Toys “R” Us said they have no desire to close any stores or lay off employees at this time.