Toys ‘R’ Us cancels asset auction as lenders hope to revive brand

Click to play video: 'Toys “R” Us Canada here to stay'
Toys “R” Us Canada here to stay
WATCH: We chat with the President of Toys 'R' Us Canada about the toy giant staying open in Canada despite shutting down operations in the U.S and other regions – Jun 26, 2018

Toys ‘R’ Us top lenders have decided to cancel the auction of the company’s brand name and intellectual property assets following a bankruptcy filing last September amid new hopes to revive the brand, a court filing on Monday showed.

The bankrupt retailer’s debtors aim to open a new Toys ‘R’ Us and Babies ‘R’ Us branding company that maintains existing global licence agreements and can invest and develop new retail shops.

Toys ‘R’ Us and Babies ‘R’ Us retail locations remain open in Canada, and is now operated as a subsidiary of Fairfax Financial Holdings Ltd. Currently, 82 retail locations are in operation across the country, according to Melanie Teed-Murch, President of Toys ‘R’ Us and Babies ‘R’ Us Canada.

WATCH: Toys ‘R’ Us could start liquidating assets as soon as Thursday

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Toys R us could start liquidating assets as soon as Thursday

According to reporting from Bloomberg, the lenders that took control of the company during its liquidation are seeking to reorganize the assets into a new company under the same licence agreements.

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“The company did generate operating profits — and without debt, its profitability would be easier to maintain,” Seth R. Freeman, senior managing director at GlassRatner Advisory & Capital Group in its San Francisco office, told Blomberg.

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“Still, the timing of this move means the new company misses the critical holiday season, in which 34 per cent of Toys ‘R’ Us merchandise is typically sold, giving it a tough three quarters of 2019 to slog through ’til holiday 2019.”

The new owners also plan to expand the brand internationally and develop its private brands’ businesses. The bids were not superior to the plan to revive the brand as it did not offer “probable economic recovery” to creditors as well as benefits to stakeholders who would maintain the brands under the new independent U.S. business, the court filing showed.

WATCH: Liquidations are now: Toys ‘R’ Us to close all stores in U.S.

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Liquidations are now: Toys “R” Us to close all stores in U.S.

Under the intellectual property auction, the company had planned to sell off its assets, which included the Toys ‘R’ Us and Babies ‘R’ Us brand names, registry lists, website domains and the company’s mascot Geoffrey the Giraffe.

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Toys ‘R’ Us filed for bankruptcy protection in September of 2017, hoping to restructure more than US$5 billion in debt, which is largely rooted in a $6.6-billion leveraged buyout by private equity firms more than a decade ago. But the company changed course in March, saying it would sell its operations in Canada, Asia and Europe, and shut down in the United States.

WATCH: Toys ‘R’ Us closing around 180 stores across U.S.

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Toys ‘R’ Us closing around 180 stores across U.S.

Bloomberg reports that the group of funds that financed the lenders now control rights to the company’s brand assets, and will receive royalty payments for use of the brand internationally.

To date, Toys ‘R’ Us has sold off all its stores and distribution centres, and major distributors such as Mattel Inc. and Hasbro Inc. have largely found new distributors.

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— With files from Reuters

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