Noteholders, Fung Retailing extend lifeline to Toys “R” Us Asia

The Business Times

Noteholders of Toys “R” Us Inc are set to take over its 85 per cent equity stake in Toys (Labuan) Holding, in a move to separate the Asian business of the toy retailer from its ultimate parent in the US.

Holders of the TRU Taj LLC’s senior secured notes, or the Taj noteholders, are to acquire the stake in Toys (Labuan) Holding, the entity that will operate and license Toys “R” Us stores in Asia.

The Taj noteholders and Fung Retailing, which holds the remaining 15 per cent interest in Toys (Labuan) Holding, have agreed to new partnership terms in a transaction that values Toys (Labuan) at about US$900 million.

Fung Retailing has also agreed to raise its stake to 21 per cent, making it the largest shareholder of Toys (Labuan).

The Taj noteholders include several investment funds and financial institutions with extensive experience investing in and owning international businesses and retail companies.

The new owners of Toys (Labuan) have decided to retain the current president and CEO, Andre Javes, and his experienced management team.

Mr Javes said the company “will be making a significant investment in technology to boost its infrastructure for the future”.

Pieter Schats, executive director of Fung Retailing, said: “As a sign of the confidence we have in the management team and future success of Toys “R” Us in the region, we are pleased to increase our shareholding in the company, reflecting our commitment to support Toys “R” Us Asia in reaching new heights.”

A spokesman for the Taj noteholders pointed out that this transaction is “a significant step in separating the valuable and growing Toys “R” Us Asia operation from the rest of the business”. “The company’s growth prospects in Greater China, Japan and South-east Asia are bright and we are excited about investing in and owning the company in partnership with Fung Retailing.”

The conclusion of this transaction will bring clarity to ownership over Toys “R” Us Asia operations, which cover over 450 stores in Japan, Greater China and South-east Asia and 85 other licensed stores in the Philippines and Macau.

Toys “R” Us stores in Asia have carried on business as usual despite the winding-down of retail operations in the US after Toys “R” Us Inc filed for bankruptcy protection last September.

As at September 2017, there were 11 Toys ‘R’ Us stores in Singapore, employing 350 staff.