Toys ‘R’ Us inks comprehensive deal to resolve some Chapter 11 cases

By Caroline Salls

Pittsburgh, July 18 – Toys “R” Us, Inc. requested court approval of a comprehensive agreement that the company said paves the way for resolution of some of the debtors’ Chapter 11 cases, according to a motion filed Wednesday with the U.S. Bankruptcy Court for the Eastern District of Virginia.

In addition, Toys “R” Us said the agreement resolves issues raised by the official committee of unsecured creditors and an informal vendor group regarding motions to wind down the company’s U.S. operations and amend its North American debtor-in-possession credit agreement and paves the way for confirmation of a Chapter 11 plan for the Toys Delaware and Geoffrey debtors and related entities.

According to the motion, the settlement also provides significant benefits to creditors, including a significant cash payment for administrative claimants and the potential for increased recoveries through preserved litigation and contingent sharing arrangements facilitated by the pre-bankruptcy secured lenders’ consent to carve out value from their collateral and claims granted as adequate protection.

Under the proposed settlement, Toys Delaware’s DIP term facility will be repaid in full.

The pre-bankruptcy secured lenders will receive all remaining value from the North American debtors until paid in full.

Holders of administrative claims will receive a baseline recovery of $180 million, an incremental shared recovery with the pre-bankruptcy secured lenders if the total recovery of the B-4 lenders from the Toys Delaware and Wayne debtors exceeds $1 billion in pre-bankruptcy B-4 claims, and a share of recoveries from non-released claims assigned to a trust.

Holders of administrative claims may opt out of the settlement. If holders of more than 7.5% of these claims elects to opt out, the settlement agreement can be terminated.

The settlement also calls for a substantial contribution claim not to exceed $2 million for the benefit of the informal vendor group and vendor members of the creditors committee to partially pay professional fees.

Toys ‘R’ Us is a Wayne, N.J., toy retailer. The company filed for bankruptcy on Sept. 19, 2017 under Chapter 11 case number 17-34665.

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