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How Toys ‘R’ Us Collapsed So Quickly

  • Speed of collapse into bankruptcy surprises some investors
  • Talks on out-of-court settlement stumbled as vendors defected
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Toys 'R' Us Seeks Bankruptcy Protection as Debt Mounts

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Toys ‘‘R’’ Us Inc., which somehow managed to sustain a crushing debt load for more than a decade after its 2005 buyout, finally succumbed this week to a “dangerous game of dominoes” that toppled the retailer in a matter of days.

Until the past few weeks, markets had reflected little doubt that a rescue deal would get done before the crucial holiday shopping season, as Toys ‘‘R’’ Us negotiated to restructure about $400 million of borrowings due next year. But while creditors held out for a sweetened offer, people with knowledge of the matter said, the company started preparing for a possible Chapter 11 filing. That kicked off a chain of events that showed how quickly a retailer can buckle when key suppliers and creditors get spooked.