Suppliers, landlords, and an insurer challenge the retailer’s path through creditor protection
Toys “R” Us Canada is racing to sell itself while creditors, landlords and suppliers chase more than $150m in claims and the chain’s store count keeps shrinking.
According to The Canadian Press, Toys “R” Us Canada has court permission to run a formal sales and investment solicitation process that will see bids in May, a buyer or buyers picked in June and closing likely in July.
The company told the court its assets are valued at $126.8m and that it expects to have at most 18 stores by the time any deal wraps.
The process lets the retailer solicit investments or sell the business or its assets, with the option of one buyer taking the entire operation or multiple purchasers buying pieces.
The company holds 162 trademarks.
Toys “R” Us Canada resorted to this strategy after it filed for creditor protection in February to cope with mounting debts and a wave of lawsuits from suppliers and landlords, according to The Canadian Press.
Stakeholders, including suppliers owed $120m, did not object to the company seeking investors or buyers.
The court‑approved framework allows bids from current owner Putman Investments or its affiliates.
Putman Investments is an Ancaster, Ontario-based holding company that also runs HMV, Sunrise Records, Northern Reflections and Ricki’s, and it bought Toys “R” Us Canada in 2021.
According to The Canadian Press, Fairfax Financial Holdings Limited paid $300m in 2018 for Toys “R” Us Canada and Babies “R” Us Canada, acquiring them during the retailer’s last stint under creditor protection that followed the US chain’s bankruptcy filing.
Fairfax later sold the Canadian business to Putman, the same outlets reported.
Allied World Specialty Insurance Company has emerged as a key counterparty in the current process.
The insurer, which covered many suppliers against nonpayment, has received more than $66m in claims from 36 Toys “R” Us suppliers.
The Canadian Press reported that Allied complained the original sale plan shut out arm’s‑length unsecured creditors and let insiders, including Putman directors or senior management, speak with other sale participants and “end the process within 29 days without court direction” if an insider bid.
Allied argued the court should be “particularly attentive to the integrity and fairness of the process” because Putman wholly owns Toys “R” Us Canada and the majority of its properties.
Toys “R” Us Canada eventually agreed to changes that left Allied “very happy,” Allied’s lawyer said in court records.
Allied has also pushed for scrutiny of related‑party real estate moves.
It told the court that Putman sold five properties valued at $42m to a related party for $38m ahead of the creditor protection filing.
Related parties in this case include subsidiaries or affiliates of Toys “R” Us Canada or Putman Investments.
Allied is based in Delaware but forms part of Fairfax’s portfolio, The Canadian Press said.
The retailer’s balance sheet pressure is reinforced by multiple lawsuits.
BNN Bloomberg reported that six toy makers filed claims last year seeking more than $4m in allegedly unpaid invoices.
Plaintiffs include Spin Master Ltd. — the Canadian company behind Melissa & Doug, Hatchimals, Ms. Rachel and Bakugan — as well as Huffy Corp., Dynacraft BSC and Kidcentral Supply, which distributes Baby Einstein and Gerber Childrenswear.
In a separate dispute, Spin Master alleges Toys “R” Us Canada failed to pay for US$3,402,703.05 in product supplied under an agreement routed through Everest Toys, a Canadian distributor owned by the same family behind Putman Investments.
TD Bank forced Everest into receivership last summer, citing “deteriorating financial circumstances.”
Toys “R” Us Canada responded that some toys were “unsaleable” and available to be returned and is seeking a refund of more than $5.6m, BNN Bloomberg reported.
On the landlord side, Toys “R” Us Canada faces at least $31.3m in lawsuits over alleged unpaid rent.
The chain has closed more than 50 stores over the past two years and told the court its 22‑store footprint could shrink further as it closes a “sub‑set of underperforming” locations and liquidates their inventory.
The Canadian Press reported that 13 existing stores have affiliates of Putman Investments as landlord and that 11 of those properties are being marketed for sale by Putman.
