Toys ‘R’ US UK CVA and administration process
Toys ‘R’ Us Limited
Agency: Headland Consultancy
When Toys ‘R’ Us filed for Chapter 11 bankruptcy in September 2017, the management of its UK operations - consistently one of the group’s biggest loss making businesses - sought help from Headland Consultancy to help win a creditor vote to implement a Company Voluntary Arrangement (CVA) and drastically reduce its rent bill in the run up to Christmas.
Although successful in this objective, achieving 98 per cent creditor approval, two months later Toys ‘R’ Us UK was unable to raise the cash to pay an imminent £15 million tax bill and collapsed into insolvency, leading to the loss of 3,000 jobs and the orderly wind down of its operations by insolvency specialists Moorfields and A&M. While the online shop closed immediately, stores were kept open to sell off stock.
Headland was tasked with supporting the administrators and had three objectives. It wanted to ensure that the situation and business objectives were clearly understood at every stage in the process, maximise value within the business to create an environment that allowed stock and assets to be sold at appropriate prices, and to keep key stakeholders informed of all developments.
With such a well known brand, leaked information and speculative stories were inevitable. Headland used background briefings to correct inaccuracies and developed an evolving narrative that emphasised simple messages around store details and customer policies, such as gift cards. It kept international, national and local print journalists and broadcasters updated on the situation. Store closure announcements were used to deploy promotional activities to drive footfall, and Headland also kept local MPs updated about closures of stores, depots or offices in their constituencies.
All external announcements were timed to allow management sufficient time to brief staff. Criticism of the UK’s management team and Toys ‘R’ Us advisers was deflected, limiting negative speculation to keep up the momentum to sell existing stock.
More than 34,000 articles covered the CVA and administration process, while the majority - 80 per cent - was either the result of proactive engagement or carried key messages. On the busiest days, up to 150 media enquiries were handled. Moorfields were prepped for ten national broadcast appearances, resulting in 140 items of coverage.
As a result of the media activity, store sales rose by up to 90 per cent allowing Toys ‘R’ Us to sell nearly all its stock at a premium to Amazon prices. During the orderly winding up, around 500 employees - one in six of the workforce - found new jobs and left of their own accord rather than taking redundancy.
‘The clear articulation of objectives which were more than met (and evidenced) was impressive. They did well on tackling all stakeholders, including political and staff, in the right time frame,’ said the judges. ‘That 80 per cent of all media comment was based on proactive work was very impressive. The outcomes were excellent in a really difficult situation for the business and its people.’