Toys R Us could file for bankruptcy this week

The toy retailer Toys R Us may be on the brink of filing for bankruptcy.

It’s one of several options the chain is considering to pay down $5 billion in debt it owes as a result of a leveraged buyout in 2005, according to The Wall Street Journal.

And a filing could come as soon as this week, according to a new report from CNBC’s Lauren Hirsch.

The chain’s trio of owners — the private-equity firms Kohlberg Kravis Roberts and Bain Capital Partners and the real-estate investment trust Vornado Realty Trust — bought the company in a deal worth $6.6 billion, taking it private.

CNBC previously reported that the chain had hired the law firm Kirkland & Ellis LLP, and that it was exploring options to take care of its debt and working with its creditors to stave off filing for Chapter 11 bankruptcy protection.

Chapter 11 protection would allow the company to restructure $400 million in debt due in 2018 then renegotiate the rest, according to CNBC.

The debt crisis looms at a critical time for the toy seller. Toys R Us last year made 40% of its sales in the fourth quarter, thanks to holiday shopping. Vendors are feeling increasingly anxious about the chain’s ability to pay down its debts, according to the reports, which could lead to a shortage of toys to stock its shelves and further exacerbate the issue.

Toys R Us has also struggled as it increasingly competes with online retailers in its two main businesses: baby goods and toys.

A Toys R Us representative did not immediately respond to a request for comment.

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Eric Write head editor and chief at The Pluto Daily