The signs were there, and now it’s official: Toys “R” Us Canada announced that it has entered creditor protection under Canada’s Companies’ Creditors Arrangement Act, a restructuring process similar to Chapter 11 bankruptcy in the U.S.
The move gives the struggling Canadian retailer, which includes Babies “R” Us Canada and The HMV Shop, short-term legal protection from creditors while it evaluates strategic options and begins a financial and operational restructuring. As part of that process, Toys “R” Us Canada plans to reduce its retail footprint to better align with current market conditions. The company said all existing stores will remain open and continue operating during the restructuring.
The initial court order grants Toys “R” Us Canada a 10-day temporary stay on creditor actions, with the possibility of extensions as the process moves forward.
To oversee the restructuring, the company has appointed Neil Taylor as Chief Restructuring Officer. Taylor will work with management to guide the business through the process while maintaining day-to-day operations and supporting customers, partners, and employees.
Alvarez & Marsal Canada has been appointed as the court-mandated monitor, a role similar to a U.S. bankruptcy trustee. The monitor will oversee the restructuring process and report to the court.
Additional details related to the proceedings will be made available through Alvarez & Marsal’s dedicated Toys “R” Us Canada restructuring website.
The Backstory:
It’s important to note that Toys “R” Us Canada is a standalone company that was spun off from the rest of Toys “R” Us and sold twice over the past decade, first to Fairfax Financial Holdings and then to Putman Investments.
Signs of trouble have been swirling for more than a year, becoming more prevalent following the closure of Everest Toys last summer. Everest was a distributor that served thousands of retail accounts across North America and was widely viewed as the foundation of the Putman Investments portfolio, led by Doug Putman, son of Everest’s founders. The portfolio also includes Sunrise Records, HMV, FYE, Crazy Forts, and another distributor, Famous Toys.
Putman’s track record has been mixed. The U.S.-based Alex Toys retail concept, pairing a name borrowed from another acquisition (Alex Brands) with a big-box Toys “R” Us concept, folded within 18 months. Rooms + Spaces, a home goods concept built on former Bed Bath & Beyond and buybuy Baby sites, came and went. T.Kettle, which once boasted 45 locations, closed in December. And several UK-based business entities, including DKB Distribution, came and went (DKB Toys & Distribution is still active).
Meanwhile, Toys “R” Us and Babies “R” Us continue to operate elsewhere in the world, including a resurgence in the U.S. led by its parent company, WHP Global. Toys “R” Us currently boasts more than 1,600 locations across 35 countries, with more planned in the future.
