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Toys R Us sets aside $156m fund for trade claims and vendors

Toys R Us is setting aside around $156 million to pay vendors for toys and merchandise shipped after the US retailer’s Chapter 11 bankruptcy filing last September.

The company’s lawyers detailed yesterday that the vendor reserve fund will be carved out of a broader budget meant to cover expenses as the retailer winds down its business.

However, the amount fails to cover total trade claims, worth roughly $760 million, said lawyers representing trade vendors as a US Bankruptcy Court in Richmond.

Vendors ranging from heavyweight such as Crayola to smaller manufacturers have said that they were ‘taken by surprise when Toys R Us announced the largest US retail liquidation ever in March.’

Many vendors believed that payment for shipments after September 18 Chapter 11 filing would be covered by a $3.1billion bankruptcy loan, but that loan gives priority to lenders and other expenses such as legal fees, reports Reuters.

“It’s already a hard pill to swallow,” said Erika Morabito, a lawyer who represents a group of trade vendors. She said in a court filing on Monday that ‘absent a more comprehensive settlement, the group’s members and other vendors will likely pursue litigation against the persons or entities responsible for the severe losses suffered.’

Morabito’s group and an official committee of unsecured creditors are pushing for reserve funds to be paid on a pro rata basis.

Hasbro has pointed the finger directly at the liquidation of Toys R Us for its sales slump of upwards of $112 million in its first quarter tradings report. The global toymaker says that associated with the collapse of the retailer was a princely sum of $64 million but that the ‘worst of the situation was now behind it.’

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