Toys R Us Hires Bankruptcy Law Firm Amid Brick-and-Mortar Meltdown

Call a bankruptcy lawyer immediately to secure assets, evaluate claims, and protect remaining employees and merchandise while stores continue to operate; acting now preserves options for creditors, landlords and consumers.

Toys R Us announced the retention of a court-focused firm and executives added that they will coordinate with trustees and private buyers to map where store closures and controlled liquidations should occur. Management worked with restructuring advisers and laid out a timeline that took account of lease expirations and vendor commitments.

File lists went out early to creditors and suppliers; the filings specify how parents and other customers who made recent shopping purchases can submit claims and how refunds or exchanges for online and in-store merchandise will be handled. Staff who worked in stores should document hours and payroll records to speed claims processing and preserve benefits for remaining employees.

Practical recommendations: freeze nonessential transfers of inventory, run a point-in-time audit of merchandise counts, schedule a creditors’ call within seven days, and assign a small internal team to collate invoices and lease files. These steps increase creditor confidence, protect recoverable value that took years to build, and give management a clear path from a restructuring dream to an actionable plan.

Toys ‘R’ Us Bankruptcy: Legal Moves, Store Liquidation, Employee Rights and Retail Fallout

Act now: employees should immediately document unpaid wages, file priority claims with the bankruptcy trustee and notify federal wage agencies so amounts owed can be tracked and paid; keep pay stubs, schedules and signed offer letters as evidence.

Executives must secure DIP financing and engage the bankruptcy-and-restructuring team to negotiate with lenders; an executive says the chain has been negotiating cash-collateral orders after lenders pressed for repayment, and the firm retained on thursday will handle those hearings in york federal court and creditor committees.

If management cannot restructure, expect store-level liquidation timelines to accelerate: liquidation notices commonly arrive within 7–21 days and chains typically close 10–30% of their footprint at first–watch year-over-year sales declines by category to decide which locations to close. Stores selling products for babies and seasonal toys often retain higher turn; categories dominated by amazon show the steepest declines and risk losing customers fastest.

Employees want severance and continuation of benefits; federal priority wage claims cover 180 days pre-filing up to $15,150 per employee, so file a claim with the trustee within the claims window and register with the state unemployment office immediately if unpaid wages or final paychecks have not been paid.

Suppliers and creditors should immediately freeze nonconforming shipments, demand updated receivables aging and secure liens where possible; vendors who pledged inventory or payment terms to the chain must evaluate recovery vs. reboot. For long-term stability, surviving retailers should cut unprofitable SKUs, shift marketing spend to fulfillment speed, and test smaller format stores while investing in profitable omnichannel flows so there are measurable improvements in traffic and margin this quarter.

Why hiring Kirkland & Ellis signals a major restructuring

Start a prepackaged restructuring process with Kirkland & Ellis to protect equity and maintain operational flexibility; their engagement, announced Thursday, usually accelerates creditor talks and access to debtor-in-possession financing.

Kirkland’s role matters because they lead complex Chapter 11 playbooks: negotiating DIP facilities, carving sale schedules for underperforming stores, and lining up stalking-horse bidders for building and brand assets. Expect focused negotiations among secured lenders, landlords and vendors where timelines compress to 30–90 days and every milestone alters leverage at the bargaining table.

Act on parallel non-bankruptcy options while the firm runs a court-backed track: run exclusive marketing for 363 sales, field strategic partnerships with Amazon for marketplace hosting and mobile fulfilment, and offer licensing deals to manufacturers such as Hasbro for toys and branded clothing lines. This dual-path approach preserves value for equity holders and keeps their retail footprint viable for shopping traffic and games enthusiasts.

Operational recommendations: cut loss-making leases by a targeted percentage, reallocate capital to top-performing categories (mobile accessories, games and seasonal clothing), implement weekly cash forecasts and quarterly covenant stress tests, and centralize procurement to lower cost of goods. A reliable источник on the matter will help map vendor concessions; align these plans with creditor votes on a disclosure statement ahead of a confirmation hearing so they can measure progress against Wall creditors’ expectations and investor scrutiny.

What Kirkland & Ellis’ bankruptcy track record implies for case strategy

Adopt a sale-first plan that protects high-value stores and secures DIP liquidity immediately. Move quickly to structure 363 sales for profitable locations, pursue a narrow going-concern sale for the core, and earmark non-core shops for staged auction or surrender to landlords.

Kirkland’s bankruptcy-and-restructuring practice routinely compresses timelines: expect most retail matters to reach a sale or plan vote within 3–9 months and nearly all major resolutions within a year. In a recent filing counsel told the federal court on Thursday that an expedited bidding schedule would run through the first 60–90 days; use that cadence to limit value leakage and to keep competition focused and disciplined.

Negotiate creditor treatment with precision: prioritize secured lenders and DIP providers to secure additional liquidity, then allocate remaining recoveries through a narrowly tailored plan that reduces litigation risk. When private owners hold leveraged equity positions, push for limited equity rollovers only where rollovers unlock superior creditor recoveries; otherwise dilute back to secured creditors and unsecured classes to preserve optionality.

Build operational and lease playbooks fast. Map every lease and shop by cash flow contribution, landlord leverage and cure exposure; close loss-making shops soon to stop cash burn while preserving bargaining power over strategic locations. Use targeted 363 auctions to create competitive tension between landlords and potential buyers and to extract the highest offers for groups of adjacent stores.

Prepare litigation and communications in parallel: document valuation work, creditor matrices and financing commitments to shorten contested confirmation fights and to maximize flexibility. Allocate resources so that every DIP covenant, milestone and hearing date has a clear owner–this reduces surprises and puts the debtor in control of pace and value recovery.

Practical checklist: immediate DIP outreach, 60–90 day bidding timetable, lease ranking by contribution, clear creditor waterfall in the plan, and reserve for additional litigation expenses. Follow these steps to mirror the tactical advantages Kirkland has delivered in recent retail restructurings and to keep options open for a better outcome for creditors and creditors’ constituencies alike.

How hiring a mega firm changes creditor and lender negotiations

Negotiate a joint creditor protocol with the firm’s lead counsel; require written treatment for unsecured claims, make part of the engagement fixed deadlines for filings, and set a standing schedule for a weekly creditor call so parties can move forward with clarity.

Execute that protocol through a conflict wall and a centralized data room; teams told creditors in parallel cases they would host regular updates, often migrate creditor communications to the firm’s hosting platform to reduce duplicate inquiries.

Set measurable milestones: 45–60 day exclusivity for stalking‑horse solicitations, five business days for claim reconciliation, weekly earnings and liquidity updates, and a delivery standard where counsel will circulate redlines to lenders within 48 hours of agreement on material terms.

Use the firm’s major market reach to expand the bidder pool: require targeted outreach to retail shops worldwide, a nine‑business‑day cadence per market for initial diligence, and added reporting that shows which leads migrate from informal interest to signed bids so committees can evaluate progress objectively.

Insist on geographic transparency: teams in hong and richmond frequently back cross‑border creditor calls, but creditors should call for live attendance lists so meeting times don’t delay critical votes, even when advisors span multiple time zones.

Expect the firm to leverage industry relationships to accelerate deals; in many cases they restore bidder confidence quickly, and creditors told committee counsel again that centralized protocols make sale processes more efficient and likely to deliver higher proceeds.

Practical checklist for committees: require written treatment terms for unsecured classes up front; schedule a creditor call cadence and a public timeline for bids; insist the firm migrate all notices through the same hosting portal; and tie fee milestones to specific progress points so advisors will be paid when deals materially advance.

Fee structures, disclosure requirements and budget expectations

Set an outside counsel fee cap equal to 4–6% of projected monthly sales for the first 90 days, require a retainer equal to one month’s expected billing, and demand weekly fee and staffing reports.

• Fee structures to expect and require
  • Hourly billing: partners typically charged $700–1,400/hr, senior counsel $500–900/hr, associates $250–600/hr, paralegals $100–300/hr; negotiate a blended rate if you want predictability.
  • Alternative arrangements: approve fixed-fee blocks for discrete workstreams (e.g., store-closing litigation, asset sales) and performance-based fee add-ons tied to measurable results (amount recovered for lenders or reduction in DIP borrowing).
  • Section 327/328 filings: require counsel to file retention motions under applicable statutes so compensation terms are subject to court approval; insist any contingency or success-fee mechanisms appear in those motions.
  • Expense policy: cap hosting and third-party e-discovery charges, require pre-approval for consultants and experts, and require itemized monthly expense reports showing amounts paid to vendors and suppliers.
• Disclosure requirements you must enforce
  • Require full Rule 2014-style disclosure upon retention: list all ties to lenders, private-equity holders, major suppliers, creditors, and any companies where counsel’s employees or partners hold interests.
  • Demand a 12-month payment history showing sums paid to outside counsel, consultants and insiders; disclose any prior representations that could create conflicts within the proceedings.
  • Insist counsel certify whether they represent overleveraged creditors, competing retailers, or private-equity firms that might shape strategy or object to sales; update that disclosure monthly.
  • If counsel hosts data rooms or advisors host creditor calls, require disclosure of hosting arrangements and fees paid so the estate can allocate costs transparently.
• Budget expectations and controls
  • Deliver a detailed DIP and administrative budget within 48 hours of filing that breaks down fees by workstream (real estate/store closures, litigation, asset sales, supply-chain issues, employees).
  • Set variance triggers: require immediate review if monthly spend varies by more than 10% from budget; authorize a formal staffing adjustment or fee cap if variance exceeds 15%.
  • Anticipate initial monthly outside counsel fees of $500k–$2m for large national cases with hundreds of stores; smaller estate fees will scale down but still require the same reporting rigor.
  • Require a staffing matrix that shows who will operate on each task, estimated hours per role, and an approval process for any hours charged beyond the matrix.
• Protect the estate and lenders
  • Require counsel to include lenders on fee notices and to explain how proposed fees affect recoveries to secured creditors; disclose any prior relationships with obtaining DIP or exit financing.
  • Limit payments to insiders and employees: require court approval for retention fees or bonuses and disclose sums paid to officers and directors before and after filing.
  • Guard against conflicts with private-equity backers or competing bidders in shopping-center sales by mandating clear walling of teams and public disclosure of any retained financial advisors.
  • Address late invoices up front: include an interest rate or holdback provision for invoices not submitted on schedule and require invoices to be submitted within 30 days of the month-end reporting period.

Checklist for the first 7 days:

1. File retention motions that state exact compensation terms and include a complete list of connections to lenders, suppliers and private-equity interests.
2. Submit a DIP budget tied to projected sales and cash receipts; include a variance protocol and a staffing matrix for outside teams.
3. Negotiate fee caps and blended rates where possible; require itemized, paid-vendor reports and pre-approval for hosting/e-discovery costs.
4. Appoint an independent fee reviewer or committee if expected fees exceed $3–5 million to speed approvals and limit disputes in court proceedings.
5. Track metrics weekly (sales, cash burn, DIP usage, professional fees charged) and distribute concise results to lenders, suppliers and key employees to reduce late objections and negative news coverage.

Apply these steps, keep disclosures current, and enforce budget gates so the estate can operate through the proceedings, preserve value for lenders and suppliers, and limit creditor challenges in cases where an overleveraged shopping chain faces steep competition and falling sales in york and other markets.

Signs counsel selection foreshadows liquidation vs a going-concern sale

Recommendation: Choose counsel whose prior mandates match your objective – hire firms with fast-track liquidation playbooks when you need quick cash recovery, or pick advisors with proven going-concern sale records when you want stores to remain open and operations to continue.

If management has already announced mass closures or accelerated clearance sales, expect counsel to pursue liquidation. Look for retained firms that advertise large-scale asset dispositions for retailers and specialized shop closings; they typically staff merchant teams that run auctions, negotiate lease surrenders with landlords and manage compensation for third-party liquidators. Those teams prioritize transaction speed, charge accelerated fee schedules, and structure sales to maximize immediate sales proceeds rather than preserve individual shops.

Counsel signals a going-concern strategy when they line up DIP lenders, strategic buyers and manufacturers or makers with existing supply agreements. Such advisors negotiate asset purchase agreements that allow chains to operate during the sale process, protect brand licenses, and coordinate cross-border logistics so stores in Asia and other countries continue to serve customers. They also design employee transition plans to maintain confidence among staff and partners while keeping public-facing locations open.

Jurisdiction and filing posture matter: New york counsel filing in the Southern District, or teams with heavy Wall Street creditor relationships, often pursue sale processes that engage large buyers and creditors quickly. Conversely, counsel who emphasize non-bankruptcy sale mechanics, pre-filing wind-downs or state-law bulk sales usually steer toward liquidation. Pay attention to whether the engagement letter references non-bankruptcy carve-outs, expedited 30–90 day timelines, or cross-border coordination for countries outside the core footprint.

Watch stakeholder indicators: if equity holders or private-equity sponsors remain publicly silent while debtholders and creditor committees negotiate, counsel likely targets creditor-driven outcomes. Fees charged as a percentage of gross sales or immediate proceeds, aggressive clawback language, and rapid retention of auction houses correlate with liquidation. Counsel that secures committed bid procedures and shows prior results delivering 40–70 percent recovery to debtholders in comparable cases generally favors going-concern sales; one that focuses on inventory monetization and zeroed equity outcomes signals liquidation and remaining asset wind-downs.

Quick checklist for counsel evaluation: confirm recent precedent transactions and ask for recovery benchmarks in percent; require transparency on fee and compensation mechanics; demand clear timelines for auctions or stalking-horse bidding; verify relationships with private-equity buyers, makers and landlords; and assess where filings will occur (which district) and whether there are non-bankruptcy options planned. These concrete data points will let you read counsel’s playbook and act with confidence.

Practical steps and timelines for liquidating 740 US stores

Execute a 15-week staged shutdown: close 50 stores per week, with the final week closing the remaining 40 stores; begin closures in lowest-sales ZIP codes and keep the highest-traffic locations open for longer to maximize proceeds.

1. Immediate actions (Day 0–3)

   • Retained law firm files authority motion; aim to file late Thursday of week 1 to secure court approval for sale procedures and employee separations.
   • Notify lenders and debtholders within 48 hours; provide a one-page plan, cash runway, and weekly reporting template so skittish creditors have visibility.
   • Freeze new purchase orders and stop inbound inventory outside critical safety or warranty items.
   • Set a hard stop for transfers between stores at 48 hours to lock inventory positions for liquidators.

2. Week 1 – Assessment and centralization

   • Operations teams audit inventory by SKU at store and DC level; deliver a prioritized sell-through list to liquidators within 72 hours.
   • IT and mobile teams migrate pricing and coupon feeds to point-of-sale and mobile app; deploy a standardized clearance tag structure across all stores.
   • Assign a single lawyer point-person (label internally as the “Wolf” coordinator) to manage court filings and liaison with outside counsel.

3. Weeks 2–15 – Rolling store closures and progressive markdowns

   • Schedule 50 store shutdowns each week. Order of closures: bottom 40% by sales-per-square-foot, then middle 40%, keeping the top 20% open later to capture higher conversion.
   • Daily markdown cadence: launch stores at 30% off on day 1 of their sale, increase to 50% by day 5, 70% by day 12, and move to 80–90% clearance in the final days.
   • Expect liquidation realization rates of roughly 35–55% of book inventory value depending on category; track category-level yield daily and reallocate high-margin toys to later-week stores if performance exceeds plan.
   • Operate stores 6–7 days per week with extended hours during weekends; keep registers and returns open to preserve customer trust and reduce chargebacks.

4. Communications and customer strategy

   • Publish store-by-store closure calendars online and via mobile notifications so customers plan visits and avoid complaints.
   • Deploy targeted mobile push campaigns for high-value customer segments and local ads outside closing stores to drive immediate foot traffic and uplift week-over-week sales.
   • Handle gift cards and returns with clear policy: honor returns for 30 days post-closure at the nearest open store or via centralized mail returns; communicate in signage and receipts.

5. Workforce, payroll, and vendor wind-down

   • Issue separation notices on an agreed weekly cadence; payroll for departing employees runs through their last day of operations plus required final pay timelines per state law.
   • Redeploy regional managers to supervise three-to-five closing stores each week; assign a skeleton crew to final-week stores to run final counts and asset pick-up.
   • Terminate non-critical service contracts early where savings exceed penalty; keep security, alarm, and basic utilities until final clearance is complete.

6. Asset disposition and secondary sales

   • Offer large buyers palletized inventory and fixtures via sealed bids by week 2; schedule store fixture removal in week 16 and 17 to avoid interfering with sales.
   • Sell high-margin, mobile-friendly items through the company mobile app and third-party marketplaces to migrate some sales online while stores close.
   • Arrange auctions for store fixtures and leasehold improvements with clear pickup windows outside retail hours to avoid customer disruptions.

7. Cash management and reporting

   • Provide lenders and debtholders with a weekly cash report and variance analysis every Friday; include sales per store, liquidation yield, payroll outlays, and rent accruals.
   • Hold a 30-minute lender call every Thursday late afternoon to surface issues early and reduce creditor skittishness; use a single dashboard for transparency.

8. Post-closure wrap-up (Weeks 16–18)

   • Complete final inventory reconciliations and insurance claims; clear remaining customer service cases within two weeks of last store closure.
   • Recover deposits, assign or surrender leases as directed by the lawyer and lenders, and finalize fixture sales proceeds for distribution to debtholders according to court orders.
   • Publish a final summary report to lenders, debtholders, and court within 30 days after the last store closes.

Metrics to track daily: store-level sales, liquidation yield vs. book value, SKU-level sell-through rate, labor cost per dollar of sale, and cumulative cash collected. Assign a single analytics lead to publish these figures each morning so operations and retained counsel can adjust pricing or accelerate closures if sales lag. While some buyers will be aggressive on bids, others will be skittish; keep options open and price fixtures to move rather than holding for premium offers.

Typical courthouse timeline from filing to store closure and asset sales

Secure debtor-in-possession (DIP) financing within 7–14 days of filing so you can operate stores, pay payroll and maintain vendor shipments with minimal interruption.

Days 1–14: File petition and obtain an automatic stay; file emergency motions for DIP financing and cash collateral. Retailers that were highly leveraged or hit by secular declines face a challenging first two weeks. Notify landlords and key vendors, document inventory of branded SKUs (hasbro, games, babies and birthday merchandise) and preserve receipts so you can still negotiate supplier consents while the court schedules hearings.

Days 15–45: Expect a Section 341 meeting of creditors within about 21–40 days and the unsecured creditors’ committee to form often within 30 days. The court issues interim DIP orders, and you should produce weekly cash reports so lenders receive timely visibility. If a stalking-horse bidder wasnt identified before the bid procedures motion, plan for additional outreach; late interest can extend the sale calendar by several weeks.

Days 45–120: File a sale motion with proposed bidding procedures, set a bid deadline and schedule a live auction and sale hearing–auctions commonly occur 30–60 days after bidding procedures approval. Asset dispositions under a Section 363 sale could close within 90–120 days, but lease rejections and abandonments often proceed faster. Expect inventory markdowns of 20–60 percent during liquidation sales on the street and in-store shopping events; coordinate with landlords on timing and store wind-down staffing.

Days 120–180+: Close sales, transition contracts and execute lease assignments. Employees may need WARN notices (60 days) unless an exception applies; some hourly staff will still receive final pay within state timelines. Secured creditors may receive a high percent recovery depending on collateral and DIP roll-up; unsecured creditors often recover a single-digit percent in liquidations. Maintain transparent reporting to the court and committee, separate high-value lines (major toy brands like hasbro) for sale or transfer, and preserve books and records to avoid late disputes that could delay closing.

Practical recommendations: keep inventory accuracy above 95 percent, line up one or more potential buyers ahead of filing, engage a liquidator or broker within the first 10 days for additional sale channels, and create SKU-level plans so critical product groups can either transfer to a buyer or be monetized quickly. Those steps shorten timelines, reduce surprise litigation and help maximize value for other stakeholders in a brick-and-mortar wind-down.