Toys “R” Us refinances debt amid Q1 earnings rise

TRU will refinance roughly half of its US$850 million in debt, signalling a continued positive direction for the retailer.
June 14, 2016

With estimated first-quarter 2016 earnings expected to rise 13% to the tune of US$79 million, Toys “R” Us has announced plans to refinance roughly half of its US$850 million debt, which is scheduled to mature in 2017 and 2018.

The New Jersey-based retailer will trade up to 89% of its existing notes for newly issued ones that will mature in five years. A third party has also agreed to purchase up to US$50 million of new debt, subject to the success of the exchange offer.

The refinancing agreement has propelled the company to release a preliminary financial report for the period ended April 30, which saw same-store sales grow 0.9% over Q1 2015. Sales for the first quarter are estimated to be US$2.32 billion, essentially flat over last year’s period.

Adjusted EBITDA for the last 12-month period ended April 30 is estimated to be US$809 million, compared to fiscal 2015 adjusted EBITDA of US$800 million.

The initial earnings report, coupled with the refinancing pact, indicate more opportune times for the toy retailer, whose struggles to turn the company around have been well-documented. Despite flat sales in Q3, TRU managed to trim sales and administration costs, which is one of the key goals of its ongoing transformation strategy.

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