Toys ‘R’ Us could go bankrupt within weeks as it struggles with billions of dollars of debt and mounting pressure from suppliers, The Wall Street Journal reported.
The global toy retailer, which has more than 1,600 outlets is considering filing for Chapter 11 bankruptcy protection in the US before Christmas. Chapter 11 can allow companies to stay operational as they reorganise and pay their creditors.
CNBC reported earlier this month that the ailing firm had hired restructuring advisers from law firm Kirkland & Ellis.
Toys ‘R’ Us has around $5bn (£3.6bn) of debt, $400m of which reportedly comes due next year. The company has been saddled with the vast debt pile ever since buyout firms KKR and Bain Capital took it private for $6.6bn in 2005.
The company previously said it was working with investment bank Lazard to help manage its attempted refinancing.
Toys ‘R’ Us’ suppliers, fearing that the retailer may be in trouble, are now tightening trade terms, including holding back on shipments unless they receive cash payments on delivery, the WSJ reported.
Toys ‘R’ Us did not immediately respond to a request for comment.
In its latest financial results, released in June, Dave Brandon, chairman and chief executive said: “The challenges we faced during [the holiday period in 2016] continued in the marketplace during the first quarter.
“Overall weakness in the baby business, as well as slower growth in the toy category and very aggressive price discounting by our competitors were significant contributors to our disappointing results.”
Many bricks-and-mortar retailers have come under intense pressure from online competitors like Amazon.