Toys 'R' Us files for bankruptcy protection in US

Toys ‘R’ Us has filed for bankruptcy protection in the US as it scrambles to restructure its debts.

The once dominant player in the US toy industry is now struggling against bigger rivals such as Amazon and Walmart.

Doubts have been cast over the future of the retailer’s nearly 1,600 stores and its 64,000 employees.

The firm’s operations in the US and Canada are affected by the bankruptcy proceedings, but its stores in Australia, Europe and a joint venture in Asia are not.

The filing is further evidence that traditional shops like Toys ‘R’ Us are struggling to keep up with online retailers.

About 13.7 per cent of all toy sales were made online last year, up from 6.5 per cent five years ago, according to GlobalData Retail.

Toys ‘R’ Us said it is looking to online sales to secure its future, after recently launching web stores for its products.

The company said it wants to use the bankruptcy process to restructure and make the company more viable.

But its enormous debt levels are its most immediate problem.

Its chief executive Dave Brandon said the company is showing $5bn (£3.7bn) of long-term debt on its balance sheets.

Lenders including a JPMorgan-led bank syndicate, and some of the company's existing lenders, have committed more than $3bn in new financing to help turn the company around.

Neil Saunders, the GlobalData Retail managing director, said: “The past decade has seen a dramatic change in the domestic toy market with new channels, increased competition, and new technology all having a deleterious impact on the sector and traditional toy stores.

“Unfortunately, Toys 'R' Us has not responded effectively to these challenges.”

Mr Brandon said: “Our objective is to work with our debt holders and other creditors to restructure the $5bn of long-term debt on our balance sheet, which will provide us with greater financial flexibility to invest in our business.”