Toys R Us (Private) Refinancing Plan to Secure Loans


Toys R Us Inc. bondholders have hired advisors to look into and promote their interests as the toy retailer works out its debt refinancing plan. At this stage there seems to be a clash of opinion between the private equity backed company and the 2018 bond holders, in terms of refinancing needs and priorities. But sources claim that refinancing of its debt is expected before the holiday season starts while the other maturity deals could be dealt with later on in the year.  If the holiday season doesn’t go well with Toys R Us, then using real estate to secure new debts might be an option highly considered.

As aired on the finance news yesterday, Toys R Us has a refinancing plan that is seeking $1.38 billion in loans in order to refinance its debt to increase lending cost and push out maturities. Toys R Us, an American toy retailer operates over 827 stores in the United States and more than 715 international stores, with about 180 licensed stores spread over 35 countries.

Toys R Us – Delaware is looking into refinancing its secured term loan worth of $646 million of 2016 as well as a large portion from its 2018 secured loan of $583 million and the $350 million issue of 7.375% notes. The main face behind this decision is Goldman Sachs, with a few other names floating around. It is expected to refinance in order to favour and increase the annual interest expense which is really costing toys r us’s financial statements. However, it is not a given that this would decrease the company expense regarding these bonds as the cost of the entire procedure is also a major hurdle. But the company stated that this plan is still in developing stages.

SEC filings indicate the issuer’s plan to either unite or extend their existing term loans for five and a half year maturity at $1.025 billion. There are also plans for another revolving loan of $350 million of additional bank debt, which will mature in five years. The secured prop co notes of 8.5% due in 2017 went up by one point to 102.75 and the 2003 – vintage unsecured notes were reported at 73, which are due in 2018. While the 10.375% unsecured company notes rounded up to 85. These are due in 2017.

As for the Credit Default Swap CDS, an upfront payment of $360,000, a $3.3 million at half way mark and a final payment of $500,000 yearly, in order to protect the $10 million bonds would be required. Toys R Us plans to pay bondholders a bonus of 101.844 percent in order to redeem the notes on or about Oct 24 2014. Reports also showed fluctuation in the loans, the B-1 term loan went from 93/94 to 97/99, due in 2016. Whereas the B2 and B3 loans are in the 86.5/88 brackets, due in 2018. Ratings of Toys R Us is in B-/B3 bracket with negative yet stable perspectives.