Toys R Us Avoids Administration But At Least 500 Jobs Will Be Lost

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Toys R Us has avoided going into administration today after it gained the approval necessary from creditors for a Company Voluntary Arrangement (CVA) rescue plan that will restructure the company.

The Pension Protection Fund (PPF) had intended to vote against the CVA, with a vote share of 20% and a requirement that the proposal is carried by a 75% majority, there was a real risk approval may have been denied. The PPF wanted Toys R Us to pay £9 million up-front to offset the company’s pension scheme deficit, the toy retailer said they would not do this. This led to the PPF stating that it would vote against the proposal.

Negotiations then took place to try and get a compromise that would save Toys R Us from going into administration. The negotiations continued during Thursday morning and early afternoon, causing the scheduled creditors meeting where the decision was to be finally decided and announced to be adjourned twice.

An agreement was eventually made after 1.30 pm which secured the PPF’s backing and finally saw the CVA approved with 98% of the vote in favour.

Toys R Us has now agreed to pay £9.8 million into the pension plan in the next three years, £3.8 million will be paid in 2018, and the remaining £6 million over the course of 2019 and 2020. The pension deficit recovery plan has also been shortened to 10 years, it was originally planned for 15 years.

While news of Toys R Us staving off administration is good to most suppliers and employees, there will still be at least 26 stores closing down in the new year which will lead to the redundancies of around 500 to 800 shop workers.

The stores which will close as part of the CVA’s implementation are: Aberdeen; Basingstoke; Belfast, Newtownabbey; Birmingham, St Andrews; Bolton; Bradford; Brislington; Cambridge; Cardiff; Derry City; Doncaster; East Kilbride; Exeter; Hayes; Kirkcaldy; Leicester; Livingston; Old Kent Road; Plymouth; Scunthorpe; Shrewsbury; Tamworth; Tunbridge Wells; Watford; York; Manchester, Central Retail Park.

The closure programme is unlikely to be limited to just the above store. Toys R Us has stated it hopes as part of the CVA that landlords in certain locations will reduce the rent. If the landlords refuse to agree with this then the affected stores will close down.

There are also locations that Toys R Us would like to see reduced in size and with the rent reduced accordingly. In such cases, not only would the landlord then be receiving less money from the toy retailer for renting the property but they would also have to foot the bill to redevelop the building so that a portion can be leased to a new tenant.

The CVA also proposed reducing the size of the company’s head office in Maidenhead and its warehouse in Coventry. For more about Toys R Us’s intentions for the sites it rent, read this article written just after the CVA proposal was published.