Toys ‘R’ Us gives early results in exchange for 10 3/8%, 7 3/8% notes

By Susanna Moon

Chicago, July 27 – Toys “R” Us, Inc. said holders had tendered $341,923,000 principal amount, or 75.98%, of 10 3/8% senior notes due 2017 and $189,576,000 principal amount, or 47.39%, of 7 3/8% senior notes due 2018 as of 5 p.m. ET on July 26, the original early tender date.

Holders chose the notes and cash option for $209,097,000 principal amount of the 2017 notes tendered for exchange, according to a company announcement.

As announced, TRU Taj LLC, an indirect wholly owned subsidiary, began a private exchange on July 13 for its $450 million of 10 3/8% senior notes due 2017 and its $400 million of 7 3/8% senior notes due 2018.

In exchange, the issuer is offering newly issued 12% senior secured notes due 2021 and, in the case of the 2017 notes, up to $150 million in cash, for notes tendered by the early tender deadline, which has been extended until 11:59 p.m. ET on Aug. 9, to coincide with the offer expiration.

Toys “R” Us is offering to issue a maximum amount of notes equal to $575 million less the amount, which may not exceed $50 million, of backstop notes issued in a separate private placement.

Tendered notes may be no longer be withdrawn, as of the original early tender date.

The exchange for the 10 3/8% notes will be capped at $400 million.

The total exchange value per $1,000 principal amount will be par amount of new notes for the 10 3/8% notes and $900 for the 7 3/8% notes. The total amount includes an early tender premium of $50.00 per $1,000 of notes tendered for exchange.

Before the amended terms, holders who tendered their notes for exchange after the early deadline would have received the total amount less the early premium.

For the 10 3/8% notes, there is also a notes and cash option based on participation levels per $1,000 of notes tendered for exchange, as follows:

• For less than 75%, holders would receive $500 of notes and $500 in cash for notes exchange by the early deadline and $500 of notes and $450 in cash for all other tenders;

• For 75% or more but less than 85%, the total exchange value is $475 of notes and $525 in cash and the base exchange value is $475 of notes and $475 in cash; and

• For 85% or more, the total exchange value is at least $450 of notes and up to $550 in cash and the base exchange value is at least $450 of notes and up to $500 in cash.

The company said it previously entered into an agreement with noteholders to tender about 63% of the 10 3/8% notes and 34% of the 7 3/8% notes, according to the offer announcement.

In addition, holders of about 25% of the 2017 notes agreed to the notes-only option.

The exchange is being made in private transactions only to holders of who are qualified institutional buyer or non-U.S. persons under the Securities Act of 1933, the release noted.

If the offer for the 2017 notes is oversubscribed, the issuer will accept the notes for exchange on a pro rata basis.

If the new issue amount for exchange exceeds the offer cap, the issuer will reduce the amount of 2018 notes accepted for exchange on a pro rata basis.

The exchange is contingent on holders tendering their notes under the agreements, completion of reorganization transactions and entry into an inter-creditor agreement providing for the collateral and guarantee arrangements.

To support the transactions, one of the support parties has agreed to purchase up to $50 million principal amount of new secured notes, or the backstop notes, which will be issued in a separate private placement as financing for some of the cash exchange amount.

D.F. King & Co., Inc. (877 478-5044, 212 269-5550, toysrus@dfking.com or dfking.com/toysrus) is the information and exchange agent. Goldman Sachs & Co. (800 828-3182 or 212 902-6595), BofA Merrill Lynch, Deutsche Bank Securities Inc., Citigroup Global Markets Inc. and J.P. Morgan Securities LLC, are the joint dealer managers.

Toys “R” Us is a Wayne, N.J.-based toy retailer.

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