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Toys ‘R’ Us reportedly close to filing Chapter 11; Fitch downgrades toy retailer


It's looking increasingly likely that Toys "R" Us may turn to Chapter 11 bankruptcy protection as a way to deal with its massive debt load.

With about $400 million of its $5 billion debt coming due in 2018, the struggling toy retailer could file for bankruptcy as soon as this week, CNBC reported.

The filing would come at a particularly crucial time for the retailer, which has been hit with reports that some of its vendors have been curtailing, or scaling back, shipments. Holiday sales are crucial to Toys "R" Us. Forty percent of the company's sales last year occurred in the fourth quarter, CNBC reported.

Fitch Ratings on Monday downgraded the long-term issuer default ratings (IDRs) for Toys "R" Us. Fitch said the downgrade "reflects the material market information regarding the hiring of various financial advisors and law firms, a claims agent and supplier issues that suggest a restructuring could be imminent."

The ratings on all of Toys entities are being downgraded to 'CC' to reflect the heightened risk of a comprehensive restructuring. According to Fitch, Toys has approximately $3.5 billion of debt due through 2020: $450 million of debt due in 2018; $1.7 billion in 2019 (excluding the $1.85 billion revolver at Toys-Delaware); and $1.3 billion due in 2020 at various entities.

"Given the long-term competitive and secular headwinds faced by the company that have led to meaningful top-line and EBITDA declines, Fitch's ratings have reflected concerns regarding Toys' long-term competitive viability and Fitch's view that its capital structure is unsustainable in the long term," the company stated.

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