Toys ‘R’ Us lenders plan brand revival as auction canceled

THE LENDERS THAT had planned to liquidate the remaining assets of Toys R Us Inc. have pivoted and are now working on bringing the brand back to life, according to new court filings. / BLOOMBERG NEWS FILE PHOTO/LUKE SHARRETT
THE LENDERS THAT had planned to liquidate the remaining assets of Toys R Us Inc. have pivoted and are now working on bringing the brand back to life, according to new court filings. / BLOOMBERG NEWS FILE PHOTO/LUKE SHARRETT

NEW YORK – The same Toys R Us Inc. lenders that have been taking heat for their role in the decision to liquidate the company in March are now working on bringing the brand back to life, according to new court documents.

In a bankruptcy court filing Monday, the funds that now control Toys R Us said they’d canceled a plan to auction off the company’s intellectual property. Instead, they are seeking to reorganize the assets into a new company that will maintain the current license agreements and invest in new retail operating businesses.

Maintaining the brands under a new independent U.S. business is the best option with respect to the recovery of the Toys R Us estate, as well as the benefit of other indirect and direct stakeholders, according to the filing. “The qualified bids were not reasonably likely to yield a superior alternative.”

The court authorized the cancellation of the auction.

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A group of funds that financed Toys R Us lenders during the bankruptcy now control rights to the company’s name and that of Babies R Us, because the intellectual property served as collateral on their loans. The group includes Solus Alternative Asset Management and Angelo Gordon.

As owners of the new entity, the funds will have discretion over trademarks and receive royalty payments from their use internationally. But it may prove difficult to ramp up U.S. operations again given the fallout from the protracted bankruptcy process. Major suppliers including Mattel Inc. and Hasbro Inc. have found new distributors, and customers have largely moved on.

The case is Toys “R” Us, 18-03090, U.S. Bankruptcy Court, Eastern District of Virginia (Richmond).

Eliza Ronalds-Hannon and Lauren Coleman-Lochner are reporters for Bloomberg News.

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