TRU Update: Settlement Agreement, Status of IP & More

October 2, 2018 |The purpose of this Member Alert is to inform Toy Association manufacturer members of additional details about the Toys“R”Us (TRU) bankruptcy case and settlement agreement. The Toy Association will continue to monitor developments in this matter and will share relevant news with members as quickly as possible. NOTE: members may access key Toys“R”Us bankruptcy documents on Prime Clerk’s website.

• Settlement Agreement Update – Initial distributions under the settlement agreement are scheduled to begin on or about October 12. We have been advised by Kramer Levin, attorneys for the Official Unsecured Creditors' Committee, that Alvarez & Marsal in their role as the debtor’s financial advisor is responsible for the claims reconciliation process and can advise on the status of any claims. For more information, contact Christopher Jadro, a director at Alvarez & Marsal.

• Sale of Toys“R”Us Asia – Toys“R”Us Asia is 85 percent owned by Toys“R”Us and 15 percent owned by Fung Retailing Ltd. Fung, claiming that it would be harmed by the manner in which the sale of the Asia operations was to be carried out, had sought through a Hong Kong Court to stop the auction. Toys“R”Us claimed Fung was using the Hong Kong courts to scare off other bidders for the Asia operations so it could purchase the operations at a discount. However, the U.S. Bankruptcy Court has ruled that it has jurisdiction over the matter and ordered Fung to drop the Hong Kong case. Fung has filed Docket No. 5043 indicating it will appeal the U.S. Bankruptcy Court’s jurisdiction over Fung in this matter. The bid deadline, originally set for October 1, has been extended to October 26 with an auction date, if necessary, of October 29 and a sale hearing on November 5 (Docket No. 5047). Separately, a group of Toys“R”Us lenders is seeking to trade its debt, as a stalking horse bid, for the 85 percent stake in the Asia operations in a deal valued at $760 million.

• Status of Intellectual Property (Docket No. 5058) – The Intellectual Property is owned by the debtors and remains subject to the liens of the term lenders and other creditors. The debtor, in consultation with its creditors, has determined that the best value to be obtained is from establishing a new, operating Toys“R”Us and Babies“R”Us branding company that maintains existing global license agreements and can invest in and create new, domestic, retail operating businesses under the Toys“R”Us and Babies“R”Us names, as well as expand its international presence and further develop its private brands business. The Toy Association has been advised by Kramer Levin that it is unlikely that there is any value in the IP that would flow through to the unsecured trade creditors, but revenues will be subject to the section of the settlement agreement requiring revenue sharing upon such recoupment.

Questions on this topic may be directed to Paul Vitale, The Toy Association’s executive vice president of finance & operations. Additional details about the bankruptcy case can be found on The Toy Association's Toys“R”Us Bankruptcy Information resource page.