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Three Bond Market Lessons From the Toys ‘R’ Us Debt Drama

  • Markets misjudged ability of company to refinance its debt
  • Bankruptcy did little to damage sentiment toward credit sector
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Toys 'R' Us Seeks Bankruptcy Protection as Debt Mounts

“From bikes to trains to video games, it’s the biggest toy store there is,” went the 1980s Toys ‘R’ Us Inc. theme tune. Now the erstwhile retail giant leaves behind some big questions for capital markets as it embarks on what is likely to be a messy bankruptcy proceeding.

Chief among those is the degree to which the company’s bankruptcy filing signals trouble for other junk-rated issuers, and whether investors may once again be caught off guard. Here are three takeaways for capital markets from this week’s news.