Toys ‘R’ Us committee objects to plan’s release of litigation claims

By Caroline Salls

Pittsburgh, Nov. 21 – The official committee of unsecured creditors for the Toys “R” Us, Inc. bankruptcy cases objected to confirmation of the plan of reorganization proposed for the Taj debtors and TRU Inc. debtors, according to a Tuesday filing with the U.S. Bankruptcy Court for the Eastern District of Virginia.

The committee said the Toys “R” Us Chapter 11 cases “have fallen well short of the debtors’ announced expectations at the time of their bankruptcy filings – which expectations, to put it mildly, did not include the full-blown liquidation of the debtors’ domestic businesses and its attendants impacts throughout the enterprise.”

With the wind-down of the Toys “R” Us businesses nearing completion, the committee said the only assets available for holders of unsecured claims of some of the debtors are litigation claims, including claims arising out of the Taj debtors’ pre-bankruptcy restructuring.

“The plan, however, releases those very claims for no consideration,” the objection said.

The committee said it has conducted a lengthy investigation of the pre-bankruptcy restructuring transactions and has concluded that Toys “R” Us, Inc. has claims against the Taj debtors and Taj noteholders in connection with those transactions.

The creditor group said “the release of these claims for no consideration is particularly troublesome in the context of these cases, where the Taj debtors’ assets are to be transferred to the credit bidder for much less value than originally anticipated.”

Specifically, the committee said the $760 million credit bid is not even enough to clear the Taj debt, much less deliver any residual value to Toys “R” Us.

In addition, the committee said the plan calls for the payment of almost $1 million in professional fees to a single noteholder, Cyrus Capital partners, without providing any proof that Cyrus provided a “substantial contribution” to the cases.

Toys “R” Us is a Wayne, N.J., toy retailer. The company filed for bankruptcy on Sept. 19, 2017 under Chapter 11 case number 17-34665.

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