Toys ‘R’ Us seeks bankruptcy court approval of intercompany settlement

By Caroline Salls

Pittsburgh, Dec. 12 – Toys “R” Us, Inc. requested court approval of a settlement reached with an informal group of Taj debtors noteholders, an informal group of B-4 lenders and the official committee of unsecured creditors appointed in the Toys “R” Us Chapter 11 case, according to a motion filed Tuesday with the U.S. Bankruptcy Court for the Eastern District of Virginia.

Toys “R” Us said the intercompany settlement resolves all matters concerning licensing agreements between Asian joint venture Toys (Labuan) Holding Ltd., its subsidiaries and Geoffrey, LLC, source-code ownership, private-label goods and trademarks and all other intercompany issues, including professional-fee allocation.

Under the proposed settlement, Geoffrey will enter into new 15-year license agreements with the Asia joint venture and the company’s French business.

The Asia joint venture and/or its subsidiaries will pay Geoffrey a 2% net royalty rate under the new licensing agreements and will relinquish its rights to $26.28 million it claims it is owed by Geoffrey under a subsidy agreement.

The joint venture or its subsidiaries will pay $3.72 million to Geoffrey on the Chapter 11 plan effective date.

In addition, the Asia joint venture will pay $6 million to Toys “R” Us - Delaware, Inc. on April 30.

The Taj debtors will pay Toys Delaware $3 million in settlement of professional fee allocation disputes.

Toys Delaware will deliver the source code and Oracle data to the Asia joint venture, which, following receipt of the source code and data, will pay Toys Delaware $5 million, plus unpaid invoiced amounts, for a total of $7.6 million.

Toys Delaware will enter into a transition services agreement to provide existing IT services to the joint venture, as well as transition and migration services set in the agreement, and the joint venture will pay Toys Delaware a $1.5 million monthly fee.

Funds of MAP 2005 Real Estate, LLC will be used to resolve intercompany fee allocation disputes, including through payment to Toys Delaware of $1.25 million, as well as payment to the Taj debtors of $1.25 million, which will be contributed to TRU Inc. as a fund for creditors.

The informal group of B-4 lenders and the creditors’ committee will withdraw their plan objections.

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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