Toys ‘R’ Us uses $3.1 billion facility to operate in ‘sensitive’ time

By Devika Patel

Knoxville, Tenn., Dec. 21 – Toys ‘R’ Us, Inc. secured a $3.1 billion DIP financing that will allow it to continue operating.

In September, the company filed for Chapter 11, despite having sought financing and other alternatives to avoid filing for bankruptcy.

“In mid-September, we filed for Chapter 11,” chairman and chief executive officer David A. Brandon said on the company’s third quarter earnings conference call on Thursday.

“This was a critical time.

“I think it’s important to note that we had worked for quite some time on a variety of financing and strategic alternatives and got to a point in September where we felt like the only option for us at that stage was to file for reorganization and restructure the company.

“It was a sensitive time, in light of the fact that that is typically the window in which we would have been very focused on preparing for holiday and instead we found ourselves dealing with major disruptions in the business,” he said.

The company now has a $3.1 billion DIP financing in place to ensure that its operations continue.

“As part of the restructuring process, we secured a $3.1 billion DIP financing, which allowed us to continue our operations during this timeframe,” Brandon said.

Adjusted EBITDA for the quarter was negative $97 million, compared to positive $5 million in the prior year period.

The company ended the third quarter with $1.3 billion of total liquidity, which was comprised of $461 million of cash and cash equivalents and $837 million of availability under committed lines of credit and the term DIP facility.

On Sept. 19, Toys “R” Us announced it had filed for Chapter 11 in the U.S. Bankruptcy Court for the Eastern District of Virginia.

The company’s Canadian subsidiary also said it planned to seek protection under the Companies’ Creditors Arrangement Act in the Ontario Superior Court of Justice.

Operations outside the United States and Canada are not part of the proceedings.

In its Chapter 11 filing, the company said it had more than $6,572,000,000 of assets and $7,891,000,000 of liabilities.

To support operations during the bankruptcy proceedings, lenders led by JPMorgan committed to provide $3.1 billion of DIP financing.

The DIP facility is made up of:

• A $2.3 billion postpetition DIP ABL credit facility consisting of a $1.85 billion ABL and a $450 million FILO senior secured term loan. Of the $1.85 billion ABL, $1.3 billion will be available on an interim basis. J.P. Morgan Chase Bank, NA will be administrative agent and collateral agent and J.P. Morgan will be lead arranger. There is a $300 million sub-facility for Canadian operations. The maturity will be 16 months, and interest will be Libor plus 250 basis points;

• A $450 million North American term loan DIP from an ad hoc group of prepetition term loan lenders. The maturity will be Jan. 18, 2019 and interest will be Libor plus 775 bps; and

• $375 million of incremental notes due in 16 months to support international operations from an ad hoc group of Taj noteholders. Interest is at 11%.

The company’s $5,268,000,000 of funded debt obligations include: $1,025,000,000 outstanding on its Delaware secured ABL credit facility due March 21, 2019, its $280 million tranche A-1 FILO loan facility due Oct. 24, 2019, its $123 million Delaware secured term loan B-2 due May 25, 2018, its $61 million Delaware secured term loan B3 due May 25, 2018, its $998 million Delaware secured term loan B-4 due April 24, 2020, its $22 million of Delaware 8ľ% notes due Sept. 1, 2021 its Toys, Inc. 7 3/8% senior notes due Oct. 15, 2018, its $859 million Propco I term loan due Aug. 21, 2019, its $507 million Propco II mortgage loan due Nov. 9, 2019, its $70 million Giraffe junior mezzanine loan due Nov. 9, 2019, $84 million outstanding on its euro ABL facility due Dec. 18, 2020, its $583 million of Taj senior notes due Aug. 15, 2021, its $355 million UK real estate credit facility due July 7, 2020, its $54 million French real estate credit facility due Feb. 27, 2018 and its $36 million of Toys-Japan Bank Loans due Oct. 25, 2019, Jan. 29, 2021 and Feb. 26, 2021.

On Sept. 25, the company closed on the $3.1 billion of financing facilities.

Toys ‘R’ Us is a Wayne, N.J., toy retailer. The company filed for bankruptcy on Sept. 19 under Chapter 11 case number 17-34665.

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