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Toys ‘R’ Us High Yield Bonds Sink in Trading Mart Amid Bankruptcy Mention

Near-term debt of Toys ‘R’ Us went into a tailspin today after news reports that the company has hired Kirkland & Ellis to assist in a restructuring also made mention of a possible bankruptcy filing.

The company’s $208 million of 7.375% senior unsecured holdco notes due 2018 hit a 19-month low of 75, versus quotes of 95 on Tuesday, according to sources.

Such a massive deterioration could, of course, facilitate a take-out of the bonds at much more favorable price, a debt exchange being one strategy that Fitch Ratings said in a note this morning the company could employ.

“Fitch expects the $208 million of 7.375% senior unsecured holdco notes to be paid down through future exchanges into other debt or by transferring cash from various operating entities through restricted payment and investments baskets,” analyst Monica Aggarwal said in today’s report.

The company’s $450 million of debt maturities coming due in 2018 consists of a €48 million French PropCo facility due February 2018, the $208 million of holdco notes due October 2018, and $186 million of B-2/B-3 term loans due May 2018.

Toys ‘R’ Us issued the following statement to LCD, but did not immediately respond with a comment on reports that it has hired Kirkland & Ellis or to reports that it is weighing bankruptcy as an option.

“As we previously discussed on our first-quarter earnings call, Toys ‘R’ Us is evaluating a range of alternatives to address our 2018 debt maturities, which may include the possibility of obtaining additional financing. We expect to provide an update about these activities, as well as the many initiatives underway to provide an outstanding customer experience in our global retail locations and webstore during the holiday season, during our second-quarter earnings call on September 26th,” Toys ‘R’ Us communications officer Amy Von Walter said in the emailed statement.

The issuer’s covenant-lite B-4 term loan due April 2020 was quoted at a 74.75 bid today, down nearly two points from the last session, sources said.

The company last year successfully completed a series of transactions to address its looming debt maturities after the toy retailer hired advisors, including Lazard, to assist in the refinancing of its capital structure.

Wayne, N.J.–based Toys ‘R’ Us is controlled by Bain Capital, KKR, and Vornado Realty Trust. Ratings are B–/B3 CCC. — Rachelle Kakouris/Kelsey Butler

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This story first appeared on www.lcdcomps.com, an offering of S&P Global Market Intelligence. LCD’s subscription site offers complete news, analysis and data covering the global leveraged loan and high yield bond markets. You can learn more about LCD here.

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