Fitch: Toys 'R' Us on watch

Fitch Ratings said it placed the BB rating of Toys 'R' Us' senior notes on Rating Watch negative following the company's announcement regarding the strategic review of its business, as well as weakness in its U.S. toy operation.

The company has indicated that it is now planning to separate its global Toys 'R' Us business from its Babies 'R' Us business, possibly through a sale or spinoff of the Babies 'R' Us business, or a sale of the global toy business. Toys 'R' Us is also reviewing its other assets and real estate, and Fitch believes the company may announce store closings after the holiday selling season.

The capitalization of the ongoing operation and the use of proceeds from possible asset sales are uncertain, although Fitch notes that the company's stated objective is to enhance shareholder value while also preserving capital market access.

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