Toys “R” Us Inc. has reached a settlement with a group of lenders that will shield them from future litigation while boosting the recoveries of the retailer’s vendors and other creditors.
Under the deal, pending court approval, Toys’ vendors and other creditors will receive a cash payment and potential for higher recoveries. In return, unsecured creditors and vendors will forgo their right to sue the group of lenders who opted to pull the plug on the retailer’s bankruptcy case.
The retailer and a group of lenders known as B4 lenders took fire from creditors and vendors in March after the company abruptly announced it would be winding down its operations, due to disappointing holiday sales.
The retailer’s more than 700 U.S. stores were officially closed in late June.
With the liquidation announcement came the possibility that vendors, creditors and other administrative claims holders—owed some $800 million—could go unpaid.
The vendors and creditors targeted the company and its lenders for allowing them to continue sending shipments of goods after the disappointing holiday season and amid a rising likelihood of liquidation.
An expanded version of this report appears at WSJ.com.