Toys ‘R’ Us to File for Bankruptcy ‘as Soon as Today,’ Bonds Collapse

Brick-and-mortar meltdown: another retailer owned by private equity firms goes bust.
The bonds of Toys ‘R’ Us, the largest toy retail chain in the US, are getting crushed, as word is spreading that it is preparing to file for bankruptcy as soon as today, ‘according to people familiar with the situation,’ cited by Bloomberg. Standard & Poor’s rates the bonds a merciful CCC-. This is deep into junk, but still two notches above D for ‘default.’
The a $208 million issue of senior unsecured notes due in October 2018 with a coupon of 7.375% had plunged to 46 cents on the dollar on Friday, from 65 on Thursday. Today, according to FINRA data, they dropped to 44 cents on the dollar.
They have now plunged 55% since September 4, when they were still trading at 97 cents on the dollar. The plunge of those notes began in earnest on September 6, when it became known that the company had hired law firm Kirkland & Ellis, whose bankruptcy-and-restructuring practice is considered a leader in the industry [see… Brick & Mortar Meltdown: Toys ‘R’ Us Hires Bankruptcy Law Firm].
At the time, ‘sources familiar with the situation’ said that bankruptcy was one of the options. And all heck broke loose for those bonds. Now bankruptcy seems to be the only option.

This post was published at Wolf Street on Sep 18, 2017.