An Ontario court has approved Toys R Us Canada’s application to sell all or parts of its business or selected assets through a sale and investment-solicitation process (SISP.)

The Ontario Superior Court (Commercial List) issued a court order allowing the struggling retailer permission to begin a 14-week bidding process covering its intellectual property, leases and operations, with successful bids expected by June 5. The company filed for creditor protection in February after accumulating $91 million in debt.

Court documents leave open the possibility of insider participation in the bidding, including from Canadian businessman Doug Putman or other parties with knowledge of the business, The Toronto Star reported. The retailer agreed to revise certain SISP rules following concerns from an insurance company Allied World that initial terms could give insiders a “procedural advantage.”

Putman, who acquired Toys R Us Canada in 2021, controls the company’s secured debt through two numbered companies. One entity is providing up to $15 million in debtor-in-possession financing during the Companies’ Creditors Arrangement Act proceedings The court approved the retailer’s request to increase the DIP by $2 million from $13 million. Another Putman company is owed $76 million and holds a security interest in the retailer’s intellectual property, the Star noted.

Retail analysts told the Star that the creditor-protection process could weigh on potential bids.

“Unless they get a bidding war over this, they may have to accept whatever the buyer offers,” David Ian Gray, a Vancouver-based analyst, told his interviewer David Ian Gray,

Bruce Winder, another retail analyst, noted the challenging economic climate and competitive pressures facing the company.

“People will probably pick at it,” he told the Star. “But I’m not sure if there’s an heir apparent who’s just going to wind up and buy the whole thing.”

Winder added that the situation reflects broader industry changes.

“It is a sad milestone,” he told the Star. “But I’m not surprised, because this is just a natural purging of the industry, as weaker formats exit and new formats emerge.”

Court-appointed Monitor Alvarez & Marsal the SISP.

Toys R Us intends to continue operating while the sales process unfolds and hopes to emerge from bankruptcy protection as a going concern with at least part of its business intact.

The court granted the retailer’s request to stay potential legal action against the company until July 13. Stay extensions are common in CCAA proceedings another extension may be granted later as the process continues to unfold.

Court documents and updates on the CCAA proceedings can be accessed on Alvarez & Marsal’s website.

Photo: CNW Group/Toys R Us Canada