Troubled US retailer Toys ‘R’ Us is preparing to close a quarter of its UK portfolio through a company voluntary arrangement.
It is understood that insolvency adviser Alvarez & Marsal will handle the CVA process, which would require approval from 75% of creditors. If a CVA goes ahead, then around 25 of the company’s 105 British stores could face closure.
The retailer has been struggling recently against the backdrop of a challenging market and increased competition from both e-commerce and supermarkets in the UK.
Toys ‘R’ US has 105 stores in the UK, covering at least 2m sq ft. Most of its stores are on retail parks or individual sites adjoining retail parks and range from around 15,000 sq ft to 50,000 sq ft. However, much of its estate is no longer fit for purpose and is viewed as being too large and outdated.
The company’s larger stores are likely to be most affected by the CVA process. Over the past year the company’s in-house real estate team has been working alongside Cushman & Wakefield to identify opportunities across its portfolio where it can re-configure and sub-lease some of the larger stores on its estate.
Toys ‘R’ Us in the UK operates as a subsidiary of the US parent company, Toys ‘R’ Us Holdings Group, which is owned by Kohlberg Kravis Roberts, Bain Capital Partners and Vornado Realty Trust.
The company’s accounts for the year to January revealed that its British business made an operating loss of £500,000 in the period, despite bringing in sales of £418m.
In September the US parent company filed for Chapter 11 bankruptcy protection. It is working with Kirkland & Ellis to address the $5bn (£3.8bn) of debt – $400m of which is due next year – it has in the US business.
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