Toys ‘R’ Us could be facing bankruptcy

Toys “R” Us has hired restructuring advisers from the prominent law firm Kirkland & Ellis as it tries to cope with hundreds of millions of dollars of debt coming due, according to two people briefed on the matter.

Among the options that the private-equity-owned retailer is considering includes filing for bankruptcy, the people said.

Toys “R” Us must find a way to pay back about $400 million in debt as it tries to increase sales in the upcoming holiday season.

The company, based in New Jersey, is still holding out hope that it can refinance the debt. But the hiring of the restructuring lawyers by a financially troubled company usually suggests that bankruptcy is a real possibility. The hiring of Kirkland & Ellis was first reported by CNBC.

“Toys ‘R’ Us is evaluating a range of alternatives to address our 2018 debt maturities, which may include the possibility of obtaining additional financing,” a company spokesperson said in a statement on Wednesday.

The company was bought by the private equity firms Kohlberg Kravis Roberts and Bain Capital, as well as the real estate firm Vornado Realty Trust, for about $6 billion in 2005.

For years, the company dominated toy sales, and its Babies “R” Us chain was a leader in baby products. But it has faced intense competition from big box retailers like Walmart and Target that have ramped up toy offerings. The rapid growth of toy sales on Amazon has also cut into the Toys “R’ Us market share.

The company has about $5 billion in long-term debt and has been burning through cash, as sales decline. As of April 29, the company had $301 million in cash or cash equivalents, down from $458 million a year earlier, according to a securities filing in June.