Toys R Us staves off collapse after rescue talks save thousands of jobs
Toys R Us has staved off collapse after creditors backed a rescue plan for the UK retailer. It follows last-minute negotiations with the Pension Protection Fund (PPF) to secure a £9.8m injection into the company’s pension fund.
However, the rescue plan entails closing 26 of its 105 UK outlets, putting 800 jobs at risk, although no stores will close until spring 2018.
Toys R Us employs 3,200 staff in total in the UK.
The retailer’s creditors met on Thursday to vote on the rescue plan, which hinged on a resolution of the pension deficit. Toys R Us’s UK staff pension scheme has a deficit of more than £25m.
The PPF said the new offer from the company was composed of a payment of £3.8m in 2018, with a further £6m promised over 2019 and 2020.
The vote saw 98% of Toys R Us creditors backing the arrangement. Toys R Us will continue to trade under its company voluntary arrangement (CVA), which is a step short of going into administration.
Steve Knights, managing director of Toys R Us UK, said: “The vote in favour of the CVA represents strong support for our business plan and provides us with the platform we need to transform our business so that we can better serve our customers today and long into the future.
“All of our stores across the UK will remain open for business as normal until spring 2018. Customers can continue to shop online and there will be no changes to our returns policies or gift cards across this period.”
The company sells largely from warehouse-style stores at the edge of towns, but says these are now “too big and expensive to run”. It is also finding it hard to compete against online toy retailers.
The chain said that, as part of the CVA proposal, a number of these stores had been identified for closure. It said talks with employees would start in the New Year.
Toy’s R Us’s parent company in the US is in formal bankruptcy protection proceedings. Recent reports suggest it is considering closing between 100 and 200 stores in America.
Figures released earlier this week show its US business lost $623m (£466.5m) in the quarter to the end of October, compared with $156m for the same period a year ago.