Toys “R” Us is reportedly at risk of breaching a covenant on one of its loans.
CNBC reported that the toy retailer is at risk of not enough cash to satisfy the terms of a secured $3.1 billion, debtor-in-possession loan from a group of lenders led by J.P. Morgan Chase. Toys “R” Us secured the loan prior to filing for bankruptcy protection in September 2017.
If the chain does breach the covenant, the lenders have the option to force it to immediately pay them back, which could, in turn force, the company into liquidation, according to the report.
Currently, Toys “R” Us is in compliance with its loan terms, and sources said the DIP lenders remain supportive of the retailer, according to the report.