Toys “R” Us Canada is seeking court approval to sell its intellectual property, including trademarks, copyrights and e-commerce domain names, to a U.S. toys and collectibles company.
Under the proposed transaction, Ad Populum, a designer and distributor that owns brands such as NECA and WizKids, would acquire all rights to the toy retailer’s IP assets, including the Toys “R” Us Canada trademark, the Babies “R” Us trademark, and the giraffe design mark, and would be free to use them at its discretion.
The retailer’s parent company, a numbered company owned by Canadian businessman Doug Putman, also plans to acquire most of Toys “R” Us Canada’s remaining assets, including 10 store leases, cash, inventory and logistics contracts.
The purchase price for the two proposed transactions has not been disclosed.
Toys “R” Us Canada sought creditor protection under the Companies’ Creditors Arrangement Act in February as part of a restructuring process. At the time, it owed approximately $91 million in secured debt to two companies controlled by Putman and more than $159 million to unsecured creditors, including toy suppliers and landlords.
The company is scheduled to seek court approval on June 22 for the two asset transactions, as well as a separate lease assignment for a roughly 48,000-square-foot location at Vaughan Mills to Fox Group Jumbo Canada.
Toys “R” Us Canada is the only surviving branch of the retailer. Fairfax Financial Holdings acquired the company out of a previous creditor-protection process after its former U.S. parent filed for Chapter 11 bankruptcy protection and shuttered its American stores in 2018.
After facing operational challenges, Fairfax sold the company to Putman Investments in 2021. However, the Canadian retailer continued to struggle amid the lingering effects of the COVID-19 pandemic, rising inflation, higher labour costs, supply-chain disruptions and a broader shift toward e-commerce.
Since April, Toys “R” Us has conducted a sales and investment solicitation process to look for a last-minute buyer and investor, ultimately selecting three successful bids, according to court filings.
It is unclear if the toy chain’s vendors and landlords, who are owed millions of dollars, will receive any meaningful recoveries.
Toys “R” Us plans to seek court approval to distribute the proceeds of the Fox Group Jumbo Transaction first toward the administration charge, including fees for lawyers and the court-appointed monitor. The rest of the proceeds will then be paid to Toys “R” Us parent company, in partial repayment of debtor-in-possession financing that allowed the retailer to continue operating during creditor protection proceedings, according to the court filing.
The proceeds of the intellectual property transaction would first be used to pay the administration charge and then distributed to another Putman-owned company, which is owed about $76 million under intellectual-property-related debt obligations that it acquired from Fairfax earlier this year.
The court documents do not specify how Toys “R” Us plans to distribute the proceeds of the transaction involving its parent company.
Experts interviewed by the Star earlier said Putman could make a “credit bid” through one of his companies, using debt owed to that company to acquire some of the Toys “R” Us assets.
