Fung Retailing may be forced to sell Toys R Us stake
Lenders owed funds from the collapsed Toys R Us North American business are trying to have a US court force Hong Kong’s Fung Group to sell its stake in the profitable Asian subsidiary.
According to a report by Bloomberg, for which Fung Retailing did not respond to a request for comment, senior lenders have made an opening bid of US$760 million for Toys R Us Asia, of which Fung Retailing holds 15 per cent. That’s well below the $1 billion the company said in April it was likely to receive for the business several months ago, citing “multiple bids”. But now the company says it has been unable to get any of those bidders to commit, alleging “interference” by Fung.
The lenders, which include York Capital Management Global Advisors, Barclays Bank and Cerberus Capital Management, plan to essentially swap debt for equity in the Toys R Us Asia business in what is termed a “credit bid”.
The business goes to auction in a US bankruptcy court next month.
However, according to Bloomberg, Toys R Us has asked a federal judge to invalidate Fung Retailing’s option giving it first right of refusal to purchase additional shares – and to force the Hong Kong company to sell its stake.
Toys R Us Asia has repeatedly stressed its business was robust and profitable during the collapse of the US and then UK operations.
The US toy retailer was unable to restructure its debt after filing for bankruptcy last year and has since progressively closed its operations in North America, the UK and Australia.
Bloomberg says the liquidation sales may not bring in enough money to cover the cost of the bankruptcy, with suppliers, lawyers and former employees all seeking payment for services they provided after Toys R Us entered Chapter 11 last September.