Toys R Us has staved off the threat of administration after creditors to the company “overwhelmingly” agreed to a restructuring plan that will secure around 2,500 jobs.
The beleaguered retailer’s proposal for a company voluntary arrangement (CVA) won the approval of 98% of creditors on Thursday, including the backing of the Pension Protection Fund (PPF). However, while the CVA will allow Toys R Us to stay afloat, at least 26 loss-making UK stores will shut as part of the restructure, meaning up to 800 jobs are set to be lost.
Consultations with employees are set to start in the new year. Commenting on the creditor vote, Toys R Us UK managing director Steve Knights said: “We are pleased to have secured the support of our creditors and will be working closely with them in the months ahead.
“The vote in favour of the CVA represents strong support for our business plan and provides us with the platform we need to transform our business so that we can better serve our customers today and long into the future.
“All of our stores across the UK will remain open for business as normal until spring 2018.
“Customers can continue to shop online and there will be no changes to our returns policies or gift cards across this period.”
The fate of all 3,200 Toys R Us jobs was hanging in the balance ahead of the ballot, with administrators waiting in the wings had the CVA been rejected.
The Pension Protection Fund (PPF) had earlier refused to back the retailer’s rescue plans, but concessions from the company, including an offer to reduce its deficit recovery plan to 10 years from 15 years, meant the deal received the PPF’s blessing.
In total, Toys R Us has agreed to pay £9.8m (€11m) into the pension plan, made up of £3.8m (€4.2m) in 2018, with a further £6m (€6.7) promised over 2019 and 2020. “This offer goes a long way to addressing the PPF’s concerns and in de-risking the pension scheme, offering greater protection for the current and retired members in the pension scheme.
“The PPF will always seek assurances on behalf of the pension schemes and pension scheme members it protects, as well as consider the interests of other UK companies that pay the Pension Protection Fund levy.”
Other creditors include the firm’s landlords, who will stomach rent cuts as part of the restructuring.
The retailer, which is owned by US-based Toys R Us Inc, trades from 84 stores in the UK and has 21 concessions.
Toys R Us has said that trading has suffered as its warehouse-style stores, opened in the 1980s and 1990s, have proved “too big and expensive to run”, while it has also struggled to keep up with online competitors.
The announcement comes just months after the US-based retailer filed for bankruptcy protection in the US and Canada.