Toys 'R' Us prepares to shut down stores following failed bankruptcy deal

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Bloomberg reported on Thursday that Toys "R" Us is making preparations for a liquidation of its bankrupt USA operations.

According to reports from CNN and Bloomberg, Toys R Us could shut down all of its stores in the U.S.

Toys "R" Us filed for bankruptcy last September with plans "to emerge with a leaner business model and more manageable debt", according to Bloomberg.

The retailer entered bankruptcy previous year with $5 billion in debt.

The Canadian retailer says it has no information or comment about various media reports that say Toys R Us is making preparations to close all of its USA stores.

The liquidation will be a big blow for the toy industry, as the chain makes up about 15 percent of U.S. toy revenue. In addition, Toys "R" Us was known for giving small companies and new products a chance, whereas other toy-selling retailers, such as Walmart and Target, prefer to go with tried-and-true merchandise.

Toys R Us may soon liquidate its USA operations, sources told CNBC.

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Some Canadian subsidiaries of USA retailers have managed to survive their parent company's bankruptcy, however.

Toys "R" Us has had a hard task on its hands, seeking to figure a way out of $4.9 billion in debt, particularly $400 million due in 2018 and $1.7 billion more due in 2019.

Mattel Inc., which makes toys including Barbie and Hot Wheels, saw its stock fall as much as 6.1 per cent.

The retailer said in January it would shut about a fifth of its US stores as it tries to emerge from one of the largest ever bankruptcies by a specialty retailer.

Toys R Us started in 1948 as a baby-furniture store in Washington, D.C. Nine years later, founder Charles P. Lazarus switched the store's focus to toys and shifted operations to Rockville, Md.

It's a possibility, industry experts agree, but one that would hinge on finding a dedicated buyer unswayed by worries about the future of store-based retailing and willing to invest in upgrading the chain's dated store network.