Toys “R” Us – Seeks Auction of Shared Services Business, Term B Lenders to Serve as Stalking Horse and Open With $57.5 Million Credit Bid

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October 9, 2018 – Toys “R” Us requested Court authority for bidding procedures in respect of the sale of its shared services business (the “Shared Services Business”) [Docket No. 5199]. Central to the bidding procedures motion is the agreement of the Debtors’ Term B Lenders to serve as a stalking horse bidder with a credit bid of $57.5 million. The Term B Lenders have agreed to cap their credit bid at $57.5 million and not otherwise participate in the auction if there is another qualifying bid.  If a third-party bids $58.0 million or more and is the successful bidder, such third-party will own the Shared Services Business following entry of a sale order and closing, and the Term B Lenders will receive the proceeds of such sale as part of the “Delaware Term Loan Distributable Proceeds.”

The motion explains, “The Shared Services Business, which Toys Delaware operates out of both Parsippany and Wayne, New Jersey, provides certain functions, including shared IT infrastructure and related services, for various current and former Toys “R” Us operations worldwide. Such operations include those no longer owned directly or indirectly by the ultimate parent company Toys “R” Us, Inc. (‘Inc.’). Before the Petition Date, many of these services were provided under the Information Technology and Administrative Support Services Agreement, dated February 1, 2009 (as may be modified, supplemented, or amended with any applicable party from time to time, the ‘ITASSA’). As more fully set forth in the Wind-Down Motion, it became clear that the Debtors’ U.S. operations were unable to continue as a going-concern in early March 2018. Since that time, the Debtors have embarked upon a successful process to sell or reorganize as going concerns various operating regions…. in consultation with the disinterested directors of Toys Delaware (the ‘Disinterested Directors’), the Debtor established a shared services center, which would continue to provide certain shared services to international operating regions, whether or not such regions would still be owned by the Debtors or their affiliates. To that end, and in connection with the respective sale of the Debtors’ operations in Canada, Central Europe, Iberia, and France, Toys Delaware entered into several agreements with the respective purchasers of the operations in these regions to provide them with certain IT shared services through April 30, 2019 (collectively, the ‘Transition Services Agreements’)….The Shared Services Business is an asset of Toys Delaware and is part of the collateral package of the Term B Lenders’ (as defined in the Plan). Under prior versions of the Plan filed with the Court, the Term B Lenders would have taken ownership and control of the Shared Services Business on the effective date of the chapter 11 plan. However, given the business realities of the now de-consolidated enterprise, including the likely standalone sale or reorganization of the Debtors’ interest in the Asia JV…Toys Delaware—through its Disinterested Directors—has determined that a potential sale of the Shared Services Business should be pursued prior to the effective date of the Plan. The Debtor believes that the proposed sale process will afford the most likely purchasers of the Shared Services Business—the now or soon-to-be independent regional enterprises and the Taj Noteholders—the opportunity to competitively bid for the Assets and assume responsibility for the operations of the Shared Service Business following the consummation of the sale. As part of this decision to market and sell the Shared Services Business, the Debtor and the Disinterested Directors negotiated an agreement of various significant terms and conditions, including, without limitation, an agreement by the Ad Hoc Group of B-4 Lenders (a) to withdraw their objections to entering into a Transition Services Agreement with the purchaser of the France business; (b) to cap their credit bid for the Shared Services Business at $57.5 million, subject to a minimum overbid of $500,000; and (c) that the applicable acquisition vehicle or Toys Delaware successor entity assume all obligations under the various Transition Services Agreements in connection with the Plan.” 

The motion proposes the following general timeline: (i) an October 21, 2018 deadline to submit qualified competing bids, (ii) an auction date, if necessary, of October 22, 2018 and (iii) an October 24, 2018 sale hearing.

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