A U.S. bankruptcy judge has authorized the sale of the Canadian operations of Toys “R” Us to Toronto-based Fairfax Financial Holdings Ltd.
At a hearing Tuesday in Richmond, Va., Judge Keith Phillips offered his grant the $300-million sale.
Fairfax was the only bidder at an auction held Monday in New York City for the 82 Canadian outlets of the toy seller. The Canadian outlets have stayed open even as the business relocated to close down its operations in the United States and the U.K.
In addition, Toys “R” Us will set aside about $156 million to pay vendors for toys and product delivered after the United States seller’s Chapter 11 bankruptcy filing last September, an attorney for the company stated.
The vendor reserve fund will be taken of a broader budget suggested to cover some costs as the merchant winds down its company in the largest-ever U.S. retail liquidation, Toys “R” Us attorney Joshua Sussberg stated at the personal bankruptcy court hearing.
Nevertheless, the quantity cannot cover total trade claims worth approximately $760 million, legal representatives who represent trade vendors said at the hearing.
Vendors varying from heavyweights such as handicraft company Crayola to smaller toy producers have said in court documents that they were taken by surprise when Toys “R” Us revealed the largest-ever U.S. retail liquidation in March, putting payments at threat.
Lots of suppliers thought that payment for shipments after the Sept. 18 Chapter 11 filing would be covered by a $3.1 billion US bankruptcy loan, but that loan offers top priority to lenders and other expenses such as legal charges, legal representatives said on Tuesday.
“It’s a truly difficult pill to swallow,” said Erika Morabito, a lawyer who represents a group of trade suppliers. At the hearing, she said vendors remain in a “dire” circumstance after laying off staff members and closing stores.
More than a lots executives, experts and lawyers have told Reuters that lots of small vendors are at threat of insolvency due to the disappearance of Toys “R” Us and Babies “R” Us in the United States.
In a court filing late Monday, Morabito stated that absent a more extensive settlement, the group’s members and other suppliers will likely pursue litigation “versus the persons or entities accountable for the extreme losses suffered.”
Both Morabito’s group and an official committee of unsecured lenders are pushing for reserve funds to be paid on a professional rata basis.
Phillips authorized the proposed wind-down spending plan at the hearing.
The business has stated it is in talks over the sale of its Asian and Central European businesses.
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