(Bloomberg) -- Toys “R” Us Inc.’s U.K. arm won creditor approval for a restructuring plan, including at least 26 store closures, after striking a last-minute pensions deal.
A pension bailout fund voted for the program -- reversing earlier opposition -- after the company pledged to pay 9.8 million pounds ($13 million) into its pension scheme over the next three years, according to an emailed statement on Thursday. Overall, 98 percent of creditors voted for the Company Voluntary Arrangement, the company said.
The restructuring agreement averts the risk of administration or liquidation at Toys “R” Us U.K., following the collapse of the U.S. parent in September. The retailer, which has sold Cabbage Patch Kids, Tickle Me Elmos and other toys in the U.K. since 1985, faltered as consumers began shunning big out-of-town outlets in favor of online alternatives, such as Amazon.com Inc.
“Toys “R” Us’s large warehouse stores were once exciting as children had never been able to see such a wide range of toys in one place,” said Fiona Paton, a retail analyst at GlobalData Plc. “But with other retailers offering lower prices, as well as a better in-store experience or a stronger online service, consumers now have little motive to choose Toys “R” Us.”
On Thursday, one of the last shopping days before Christmas, the U.K. business was holding a sale, including half-price Disney Princess Glitter Bags, Star Wars-themed Nerf guns and VTech Toot Toot Drivers Amusement Parks.
Toys “R” Us U.K.’s travails highlight difficulties for store operators in the country, as uncertainty around Brexit dents consumer spending and pushes up import costs by weakening the pound. The number of retailers in significant financial distress has jumped 22 percent in a year, according to insolvency company Begbies Traynor Group Plc.
Toys “R” Us will start closing U.K. stores, predominately larger units, early next year as it boosts its focus on smaller outlets and online sales. The retailer will also cut rent payments and shed some of its about 3,000 workers.
The company will pay 3.8 million pounds into its pension pot next year, and a further 6 million pounds over the following two years, according to the Pension Protection Fund. Pension trustees will also get greater powers if some conditions aren’t met, it said.
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