Administrators to Toys R Us UK and a pack of American hedge funds could be heading for a £35m legal tussle which will dictate the amount of money recovered by the pensions lifeboat.
Sky News has learnt that Moorfields, which has been sifting through the wreckage of the UK's biggest toy retailer since it collapsed in February , has instructed lawyers to assess the validity of a $50m charge held by the hedge funds over the British chain.
The funds, which ten months ago included big industry names such as SilverPoint Capital and BlueMountain Capital Management, are part of a group of secured creditors known as the TAJ Noteholders which provided a $375m loan to Toys R Us's US parent company after it filed for Chapter 11 bankruptcy protection in September last year.
Some of the debt is understood to have traded since then.
People close to the process said that if legal advice validates the hedge funds' preferential claim, it would reduce the sums available to unsecured creditors, which include the Pension Protection Fund (PPF (Shenzhen: 300258.SZ - news) ) and Her Majesty's Revenue and Customs (HMRC).
Toys R Us UK's collapse cost more than 3,000 jobs, and heralded a disastrous year for the British high street, with chains such as Maplin and Poundworld following it into administration.
Other prominent retailers including Carpetright (Other OTC: CGHXF - news) , House of Fraser, Mothercare (Other OTC: MHCRF - news) and New Look have axed stores and staff as they try desperately to secure their future amid the most brutal operating and trading environment for decades.
Details of the legal advice being taken by Moorfields have been set out in the first progress report produced by the Toys R Us UK administrator.
The report, which has been sent to creditors in the last few days, has been obtained by Sky News.
"The administrators are currently taking legal advice as to the extent of the validity of the security granted by the companies to the secured creditors and further information in this regard is likely to be included in a future progress report," it said.
The uncertainty over the £35m claim means that administrators are currently unable to provide a definitive estimate of the recovery prospects for unsecured creditors.
Moorfields has received more than 600 claims from unsecured creditors, including for £93m from the PPF and a £16m VAT claim from HMRC.
The PPF's claim is notable because of the role played by the pensions lifeboat in the days before Christmas last year, when it helped to broker a deal that involved store closures and rent cuts.
Toys R Us UK's Company Voluntary Arrangement (CVA) plan was overseen by advisers at Alvarez & Marsal, prompting the PPF to demand that an independent firm be appointed to handle Toys R Us UK's administration.
The PPF agreed at the eleventh hour to vote in favour of the CVA, which had been due to trigger the closure of a quarter of its 105 shops.
Following its collapse into administration, the final Toys R Us UK shop closed in April.
Moorfields' report reveals that it recovered more than £50m from the sale of stock, a better outcome than had been expected, with the trading profit for the business after it was placed into administration expected to be in the region of £33m.
Toys R Us's larger US business was placed into liquidation in March.
A spokesman for Moorfields declined to comment on the report to creditors.