Toys ‘R’ Us forecasts performance to improve after debt refinancings

By Devika Patel

Knoxville, Tenn., Sept. 19 – Toys ‘R’ Us Inc. reported that its note repurchases and exchange offers in the last quarter will help the company improve its financial performance.

“We recently completed the refinancing of some of our upcoming debt maturities,” chairman and chief executive officer David A. Brandon said in Monday’s earnings call.

“These refinancings provided the opportunity for the company to continue its turnaround and deliver further improvements in its financial performance.”

Debt repurchases

As part of the refinancing transactions, Toys ‘R’ Us holders tendered $344,921,000 principal amount, or 76.65%, of the company’s 10 3/8% senior notes due 2017 and $191,656,000 principal amount, or 47.91%, of its 7 3/8% senior notes due 2018 in an exchange that ran until 11:59 p.m. ET on Aug. 9.

In the exchange, the issuer offered new 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. The exchange for the 10 3/8% notes was capped at $400 million.

Toys ‘R’Us, Inc. plans to redeem its $105,079,000 of remaining 10 3/8% notes due 2017 on Sept. 29. The notes to be redeemed represent all of the 10 3/8% notes that were not tendered in the Aug. 9 exchange offer.

Notes sale

The company funded the debt repurchases through a $141,549,000 private placement of subsidiaries TRU Taj LLC’s and TRU Taj Finance, Inc.’s 12% senior secured notes due 2021. The sale settled on Aug. 26.

The issuers issued $407.39 million of the notes in the Aug. 9 exchange offer for the company’s 10 3/8% senior notes due 2017 and 7 3/8% senior notes due 2018 for a total issue size of $582.75 million.

The notes may be redeemed at par plus a make-whole premium at any time until Feb. 15, 2018. In addition, the issuers may redeem up to 10% of the notes every 12 months at 103 at any time prior to Feb. 15, 2018. Beginning Feb. 15, 2018, the notes will be callable at par. Noteholders have a change-of-control put option at 101, and the company must offer to repurchase the notes at par with the proceeds of asset sales or certain types of debt.

Financial highlights

Toys ‘R’Us, Inc. ended the quarter with global liquidity of $1 billion, comprised of cash and cash equivalents of $420 million and availability of $571 million under lines of credit. The consolidated leverage for the second quarter improved to 6.05x compared to 6.65 in the second quarter of 2015.

Toys 'R' Us Delaware Inc. ended the quarter with liquidity of $557 million comprised of cash and cash equivalents of $174 million and availability of $383 million under a revolver. The consolidated leverage for the second quarter improved to 6.5x compared to 6.9x in the second quarter of 2015.

Toys ‘R’ Us is a Wayne, N.J.-based toy retailer.

© 2015 Prospect News.
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