Tuesday, 05 December 2017 15:38

Toys R Us to Seek CVA with UK Store Closures Announced

Fears over the future of embattled toy retailer Toys R Us continue to mount after its UK business announced it was to seek a Company Voluntary Arrangement (CVA) to handle a mounting debt crisis.

The company, which is thought to have made a trading loss for seven out of the past eight years, has announced plans to close a minimum of 26 stores in the UK, with a loss of 800 jobs.

Bosses have drawn up a CVA plan outlining proposals to restructure its debts in a way which will allow the company to continue trading. It will be put to creditors on December 21st.

The move confirms fears that the financial woes suffered by Toys R Us in the USA might blow across the Atlantic to the UK. The US and Canadian operation filed for bankruptcy earlier this year amidst its own debt problems.

Although the American arm is the global parent company, the Toys R Us exists as a distinct financial entity in the UK. A spokesman insisted the decision to seek a CVA was unrelated to the company’s bankruptcy in the US.

But once news emerged that Toys R Us had filed for Chapter 11, it was reported that UK suppliers were halting deliveries, understandably concerned about the ongoing viability of the company and the risk of not getting paid.

Content continues below

Fraudulent Emergency Services Advertising Company Wound Up

A company called "The Emergency Services (Media Dept) Limited" that falsely claimed to be linked to the emergency services in an attempt to convince small businesses in to placing adverts in its…

'Who's Gone Bust?' report makes for sobering reading

The Centre for Retail Research has published its latest Who's Gone Bust? report, giving an insight into how retail companies have been affected by five years of economic turbulence. Worryingly for…

Paying to Get Paid? Freelancers Targeted by Prompt Payment Fees

New York publishing house Condé Nast has reportedly come up with a novel solution to the tricky issue of ensuring its contributors get paid on time. As reported here, the magazine empire behind…

When is it wise to ditch a non-paying client?

Having to chase late payments is sadly an experience most people in business have to go through at one time or another. But knowing when irritating delays have crossed the line into a breakdown in…

What does a CVA mean for suppliers?

A CVA is a recognised instrument for resolving company insolvency. In that sense, the fact that Toys R Us has started the CVA process confirms suppliers’ fears - that the company does not have the liquidity left in the business to pay its debts.

For all parties, a CVA can be regarded as the least intrusive way to resolve insolvency and settle debts. Without having to go through the protracted process of administration, or the legal dismantling and sharing of spoils that occurs in liquidation, a CVA is founded on the principle of compromise.

The aim is to find a way to satisfy creditors with a repayment plan that allows the insolvent company to continue trading.

For Toys R Us creditors attending the meeting on 21st December, the key is whether the proposed terms of the CVA are acceptable to their own financial requirements. In the spirit of compromise, creditors will usually have to accept a reduction in debt repayments spread out over a longer period of time, or else write off a portion of what is owed to them completely.

Over 150 Years Of Industry Experience

Our modest but highly skilled team has a combined total of over 150 years of experience in commercial credit management and B2B debt collection. From independent IT contractors to major film and TV publishers, Safe Collections has the knowledge and experience you need to get paid quickly and cost effectively.

Image "Toys R Us” by flickr user “Mike Mozart” is licensed under CC BY 2.0

8:00 - 20:00

8:00 - 20:00

Our Opening Hours Mon. - Fri.

+44 (0) 1772 454505

+44 (0) 1772 454505

Got questions? Call us today. No hard sell, guaranteeed. 

© 2017 Safe Collections is a trading name of Safe Collections Limited. Company Number: 01815264. VAT Number: GB407358159. All Rights Reserved.