Declaration of David A. Brandon, Chairman of the Board and Chief Executive Officer of Toys R Us, Inc., In Support of Chapter 11 Petitions and First Day Motions filed by Michael A. Condyles of Kutak Rock LLP on behalf of Toys R Us, Inc.. (Condyles, Michael)
To learn more, please sign up to a demo or get started now .
Case 17-34665 Doc 20 Filed 09/19/17 Entered 09/19/17 04:53:46 Desc Main
Document Page 1 of 47
Edward O. Sassower, P.C. James H.M. Sprayregen, P.C.
Joshua A. Sussberg, P.C. (pro hac vice admission pending) Anup Sathy, P.C.
KIRKLAND & ELLIS LLP Chad J. Husnick, P.C. (pro hac vice admission pending)
KIRKLAND & ELLIS INTERNATIONAL LLP Robert A. Britton (pro hac vice admission pending)
601 Lexington Avenue Emily E. Geier (pro hac vice admission pending)
New York, New York 10022 KIRKLAND & ELLIS LLP
Telephone: (212) 446-4800 KIRKLAND & ELLIS INTERNATIONAL LLP
Facsimile: (212) 446-4900 300 North LaSalle
Chicago, Illinois 60654
-and- Telephone: (312) 862-2000
Facsimile: (312) 862-2200
Michael A. Condyles (VA 27807)
Peter J. Barrett (VA 46179)
Jeremy S. Williams (VA 77469)
KUTAK ROCK LLP
901 East Byrd Street, Suite 1000
Richmond, Virginia 23219-4071
Telephone: (804) 644-1700
Facsimile: (804) 783-6192
Proposed Co-Counsel to the Debtors and Debtors in Possession
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE EASTERN DISTRICT OF VIRGINIA
RICHMOND DIVISION
)
In re: ) Chapter 11
TOYS âRâ US, INC., et al.,1 3 Case No. 17â34665 (KLP)
Debtors. ; (Joint Administration Requested)
)
DECLARATION OF DAVID A. BRANDON, CHAIRMAN OF THE
BOARD AND CHIEF EXECUTIVE OFFICER OF TOYS âRâ US, INC.,
IN SUPPORT OF CHAPTER 11 PETITIONS AND FIRST DAY MOTIONS
1, David A. Brandon, hereby declare under penalty of perjury:
1. I am the Chairman of the Board and Chief Executive Officer of Toys âRâ Us, Inc.2
and have served in that role since July 1, 2015. I also currently serve on the boards of directors of
The Debtors in these chapter 11 cases, along with the last four digits of each Debtorâs federal tax identiï¬cation
number, are set forth in the Debtorsâ Motion for Entry of an Order (I) Directing Joint Administration of Chapter
I 1 Cases and (II) Granting Related Relief filed contemporaneously herewith. The location of the Debtorsâ service
address is One Geoffrey Way, Wayne, NJ 07470.
In this declaration âToysâ refers to Toys âRâ Us, Inc., and âDebtorsâ refers to Toys together with its Debtor
affiliates. I will use âCompanyâ to refer to Debtors and their non-Debtor affiliates, collectively.
Case 17-34665 Doc 20 Filed 09/19/17 Entered 09/19/17 04:53:46 Desc Main
Document Page 2 of 47
Toys âRâ Us â Delaware Inc., Toys âRâ Us Childrenâs Fund, Inc., Dominoâs Pizza Inc., DTE
Energy Company, and Herman Miller, Inc.
2. From 1999 to 2010, I was Chairman of the Board of Directors and Chief Executive
Officer of Dominoâs Pizza Inc. Before Dominoâs, I was the Chief Executive Officer of Valassis
Communications, a provider of media and marketing services in North America and Europe. I
also served at Athletic Director at the University of Michigan from 2010 to 2014.
3. I graduated from the University of Michigan in 1974 with a bachelorâs degree in
speech communications and have been awarded honorary doctoral degrees from Walsh College,
Schoolcraft College, Lawrence Technological University, Cleary College, Central Michigan
University, and Albion College.
4. Each Debtor filed voluntary petitions for relief under chapter 1 1 of the United States
Bankruptcy Code, 11 U.S.C. §§ 101â1532 (the âBankruptcy Codeâ), in the United States
Bankruptcy Court for the Eastern District of Virginia (the âEU on September 18, 2017 the
(âPetition Dateâ). To minimize the adverse effects on their business, the Debtors also filed motions
and pleadings seeking various types of âfirst dayâ relief (the âFirst Day Motionsâ).
5. I am generally familiar with the Debtorsâ dayâtoâday operations, business and
financial affairs, and books and records. I submit this declaration to explain to the Court and
interested parties why the Debtors filed these cases, and in support of the First Day Motions.
6. Unless I state otherwise, this declaration is based upon the following:
0 personal knowledge;
0 information provided to me by my management team and advisors, including
investment banker Lazard Freres & Co. LLC (âLazardâ), restructuring advisor
Alvarez & Marsal North America, LLC (âA&Mâ), and restructuring counsel
Kirkland & Ellis LLP(âK&Eâ);
o my review of documents and information concerning the Debtorsâ operations,
financial affairs, and restructuring initiatives; and
Case 17-34665 Doc 20 Filed 09/19/17 Entered 09/19/17 04:53:46 Desc Main
Document Page 3 of 47
o my opinions based on my experience and knowledge.
7. I am over the age of 18 and authorized to submit this declaration on behalf of the
Debtors. I would testify to the matters stated in this declaration.
Preliminary Statement
JâJâJâ âI donât want to grow up, Iâm a Toys âRâ Us Kid. JâJâJâ
Thereâs a million toys at Toys âRâ Us that I can play with...
From bikes to trains to video games
Itâs the biggest toy store there is
I donât wanna grow up, cause if I did
JâJâJâ I couldnât be a Toys âRâ Us kid.â JâJâJâ
â Toys âRâ Us Theme Song
8. Toys âRâ Us delivers children their biggest smiles of the year. Toys âRâ Us gives
parents, in turn, who used to be Toys âRâ Us kids, an opportunity to fulfill their childrenâs wildest
dreams. Close your eyes and see visions of the gleeful smiles, the bouncing feet, and even hear
shrieks of a child frantically ripping off the wrapping paper to reveal the awaiting surprise. A toy
is so much more than âa small article of little value;â it is a âprized souvenirâ or the most special
gift that lasts a lifetime.3 This is why toys always will be the object of childrenâs affection (and
attention). While the average price of each toy is not substantial, the global toy market exceeds
$87 billion annually. And it continues to grow.4 Yet just one toy âshowroomâ exists in the United
States, Europe, Asia, Africa, and the Middle East, affording children and toy manufacturers across
3 Dictionary.com
4 http://www.toyassociation.org/PressRoomZ/News/ZO16_News/Global_Toy_Market_to_Surpass_90_Billion_
in_2016.aspx
Case 17-34665 Doc 20 Filed 09/19/17 Entered 09/19/17 04:53:46 Desc Main
Document Page 4 of 47
the globe a chance to create lifeâlong memories through gifts and souvenirs 365 days each year.
That one toy showroomâToys âRâ Usâis here to stay.
9. Since Charles Lazarus opened a baby furniture store in 1948, Toys âRâ Us has
grown into the leading retail brand dedicated exclusively to kids, toys, and games. Toys âRâ Us
offers one of the largest and most upâtoâdate selection of toys at nearly 1,600 toy stores in 49 states
and 38 countries. Operating under the Toys âRâ Us, Babies âRâ Us, Toys âRâ Us Outlet, and
Toys âRâ Us Express brand names as well as at Toysrus.com, Babiesrus.com, and other websites
in international markets, Toys âRâ US is the leading chain of toy stores in the world. A global
reach, effective marketing, and broad product diversityâcombined with the Companyâs loyalty
program, which includes 19 million domestic users and 12 million international usersâincreases
market exposure and builds customer loyalty. Today, The Toys âRâ Us brand is one of the most
recognizable brands in the world, overtaking the likes of Crayola®, LEGO®, and Apple® for
recognition among children.5
10. Toys âRâ Us, however, has been operating for more than a decade with significant
leverage, necessitating the use of substantial amounts of cash each year (approximately
$400 million) to service the more than $5.0 billion of funded indebtedness. But these substantial
debt service obligations impair the Companyâs ability to invest in its business and future. As a
result, the Company has fallen behind some of its primary competitors on various fronts, including
with regard to general upkeep and the condition of our stores, our inability to provide expedited
shipping options, and our lack of a subscriptionâbased delivery service. Further, the Company has
5 See âKids Top 50 Brandsâ (2016 Smarty Pants Brand Love Study) (ranking Toys âRâ Us the number #7 among
kidsâ top 50 brands).
Case 17-34665 Doc 20 Filed 09/19/17 Entered 09/19/17 04:53:46 Desc Main
Document Page 5 of 47
failed to capitalize on the iconic Toys âRâ Us brand and its unique position as a oneâstop shop for
toys every day year round. The time for change, and reinvestment in operations, has come.
11. More recently, the Companyâs need for a comprehensive solution to its capital
structure issues caused widespread âbankruptcyâ speculation in the media, leading to a severe
constriction in the Companyâs trade terms. More specifically, in late July the Company hired
Kirkland & Ellis LLP and Alvarez & Marsal North America, LLC, complementing its retention of
Lazard, to consider restructuring and capital structure solutions. Recognizing that short term
âBandâAidsââwhich the Company utilized historically to solve nearâterm maturitiesâno longer
were appropriate amidst an ever shifting landscape in the retail world, Toys âRâ Us appreciated
and embraced the notion that a holistic reorganization was necessary to ensure viability and
growth. Beginning in late August, the Company engaged with a group of its Bâ4 Term Loan
lenders to secure liquidity and afford breathing room through the holidays to consider (and in
engage in discussions regarding) restructuring alternatives. While those discussions ultimately
morphed into negotiations regarding debtorâinâpossession financing, a news story published on
September 6, 2017, reporting that the Debtors were considering a chapter 11 filing, started a
dangerous game of dominos: within a week of its publication, nearly 40 percent of the Companyâs
domestic and international product vendors refused to ship product without cash on delivery, cash
in advance, or, in some cases, payment of all outstanding obligations. Further, many of the credit
insurers and factoring parties that support critical Toys âRâ Us vendors withdrew support. Given
the Companyâs historic average of 60âday trade terms, payment of cash on delivery would require
the Debtors to immediately obtain a significant amountâover $1.0 billionâof new liquidity.
12. The timing of all of this could not have been worse, as the Company is in the process
of building holiday inventory. While birthdays, new game releases, and other special events drive
Case 17-34665 Doc 20 Filed 09/19/17 Entered 09/19/17 04:53:46 Desc Main
Document Page 6 of 47
yearâround sales, the holiday season is the most important for annual results. In the fourth quarter
(the weeks prior to Christmas), the Company generates approximately 40% of its annual revenue.
Monthly and Cumulative Revenue
(FY 2016â2017)
$140000
$120000
$115407 $11,451.1
$10,000.0
$8,000.0
$6,000.0
54000.0
52000.0 M
6
d»
N? Nâ s N, «3â s N â3" '§â s4 â3" '0 s4 '4â 4â
»\ of wâ w of wâ wâ 9ââ wâ wâ ~,\â° wâ wâ of wâ wâ $9 wâ wâ $9 wâ wâ ~,\â
'v\ 4.5 v-\ %\ Q â\\ $\ 9\ ,$\ .;»\ 4% ~\ 'v\ a) o-\ <3\ b\ «\ $\ 9\ ¢\ ,;»\ g)
âManthly Revenue âZDl7 Cumulative Revenue » Actual 2018 Cumulative Revenue » Actual/Forecast
To prepare for the holiday season, Toys âRâ Us significantly increases inventory in September to
fill store shelves With the selection and variety of products our customers expect. Accordingly, I
believe it is critical that the Company reopen its supply chain immediately to ensure a successful
holiday season.
13. The Company commenced these chapter 11 cases to address its nearâterm liquidity
issues, longerâterm capital needs, and accomplish a comprehensive reorganization that Will enable
Toys âRâ Us to turnaround and simply make better its business for the millions of Toys âRâ kids
around the globe. This turnaround begins today. The proposed $3.1 billion of debtorâinâpossession
financing, coupled With authority to pay certain vendors in the ordinary course, Will stabilize
operations and reopen the supply channels before the holiday season. In addition, and of critical
Case 17-34665 Doc 20 Filed 09/19/17 Entered 09/19/17 04:53:46 Desc Main
Document Page 7 of 47
importance, the debtorâinâpossession financing also provides the Company with hundreds of
millions of dollars of new money that is available for immediate and direct investment in the
Companyâs stores and operations. I am advised that procuring liquidity for direct operational
investment as part of a DIP financing is the exception not the rule. But securing this muchâneeded
capital infusion now presents Toys âRâ Us with an opportunity to stabilize operations, reset its
balance sheet, and begin building a better and brighter future for the benefit of all stakeholders.
Chapter 11 was certainly not the Companyâs preferred outcome, but this is exactly what chapter
11 is intended to accomplish. And that is exactly what Toys âRâ Us intends to do.
14. To familiarize the Court with the Debtors, their business, the circumstances
leading to these chapter 11 cases, and the relief the Debtors are seeking in the First Day Motions,
I have organized this declaration as follows:
0 Part I describes the Debtorsâ corporate history;6
0 Part II describes the Debtorsâ prepetition capital structure;
0 Part III describes the Debtorsâ operations and current improvement initiatives;
0 Part IV describes the circumstances leading to the filing of these chapter 11 cases;
and
0 Part V describes the proposed debtorâinâpossession financing.
Discussion
1. Company History.
15. Charles Lazarus grew up in his fatherâs bicycle shop where he dreamed of opening
his own store. Anticipating a growth in birth rates following his service in World War II, he
opened Childrenâs Bargain Town, a baby furniture store, in Washington DC. in 1948. Lazarus
6 Many of the financial figures presented in this declaration are unaudited and potentially subject to change, but
reï¬ect the Debtorsâ most recent review of their business. The Debtors reserve all rights to revise and supplement
the figures presented herein.
ToYsï¬Sâ
Campâeï¬d an Tnmil mum by Emu, m1, Am 1v ind Jinan
publlz "mm and Vumado mug:
Came bunde m
wasmmgn n c as
warm 5 Barlmn Town
gamma Bataa'li'ï¬s Manned 707. m Asia 1v
mm mm M & Fun:
1995 1993 was was 2011 2015 2916 2917
rays-ms 7mm: mid:
n5 dzbat 0mm mom mm m
am
hundltd mm mm»
owntd Tmemmmniâ L:de mg Tays'k"us
sIureIn mm and ad: Dysdelsas! shops
Ilctustd unemmn m mmm
weapon
I mammme I Cnmummlkâalgd I Mmommglmmm I m
Case 17-34665 Doc 20 Filed 09/19/17 Entered 09/19/17 04:53:46 Desc Main
Document Page 11 of 47
Senior Notes, the Euro ABL Facility, with separate dedicated facilities for the United Kingdom,
France, and Japan (the UK Real Estate Credit Facility, the French Real Estate Credit Facility, and
the ToysâJapan Bank Loans); and (iii) financing for certain standalone domestic entities, including
Toys âRâ Us Delaware, Inc. and two of the Debtorsâ real estate holding companies (the Propco I
Term Loan Facility, the Propco II Mortgage Loan, the Giraffe Junior Mezzanine Loan, the
Delaware 7.375% Senior Notes, and the Toys Inc. 8.75% Unsecured Notes). The obligors under
each financing are depicted on the corporate organizational structure chart, attached hereto as
Exhibit A, and the maturity dates and aggregate principal amount outstanding outstanding as of
the Petition Date under each financing are as follows:
Outstanding Principal
Funded Debt Maturity Amount as of 9/ 17/ 178
North American Debt Facilities
Delaware Secured ABL March 21, 2019 $1,025 million9
Credit Facility
Tranche Aâl (âFROâ) Loan October 24, 2019 $280 million
Facility
Delaware Secured Term May 25, 2018 $123 million
Loan â Incremental Facility
(âSB_239)
Delaware Secured Term May 25 , 2018 $61 million
Loan â Second Incremental
Facility (âB-3â)
Delaware Secured Term April 24, 2020 $998 million
Loan â Incremental Facility
(â6B_439)
Delaware 8.75% Unsecured September 1, 2021 $22 million
Notes
Toys, Inc. 7.375% Senior October 15, 2018 $208 million
Notes
8 All balances as of September 17, 2017 other than certain de minimis Asian and Japanese balances.
9 $1,850 million of total commitments
11
Case 17-34665 Doc 20 Filed 09/19/17 Entered 09/19/17 04:53:46 Desc Main
Document Page 12 of 47
. Outstanding Principal
Funded Debt Mammy Amount as of 9/ 17/ 178
Propco I Unsecured Term August 21, 2019 $859 million
Loan Facility
Propco II Mortgage Loan November 9, 2019 $507 million
Giraffe Junior Mezzanine November 9, 2019 $70 million
Loan
International Debt Facilities
Euro ABL Facility December 18, 2020 $84 million10
Taj Senior Notes August 15, 2021 $583 million
UK Real Estate Credit July 7, 2020 $355 million
Facility
French Real Estate Credit February 27, 2018 $54 million
Facility
October 25, 2019; $36 million
ToysâJapan Bank Loans January 29, 2021;
February 26, 2021
Total Funded Debt: $5,265 million
A. North American Debt Facilities and Intercreditor Agreements
1. Delaware Secured ABL Facility.
24. Toys âRâ UsâDelaware, Inc. (âToysâDEâ), as lead borrower, Toys âRâ Us (Canada)
Ltd/Toys âRâ Us (Canada) Ltee (âToys Canadaâ), as Canadian borrower, certain direct and
indirect whollyâowned subsidiaries of ToysâDE, as guarantors, Bank of America, NA, as
administrative agent, Bank of America, NA. and Wells Fargo Bank, NA, as coâcollateral agents,
and certain financial institutions, as lenders, are party to that certain Third Amended and Restated
Credit Agreement, dated as of March 21, 2014 (as amended, novated, supplemented, extended or
restated from time to time, including through the First Amendment dated as of October 24, 2014,
10 $186 million of total commitments (£138 million at .74 GBP/USD as of September 18, 2017).
12
Case 17-34665 Doc 20 Filed 09/19/17 Entered 09/19/17 04:53:46 Desc Main
Document Page 13 of 47
the âDelaware ABL Credit Agreementâ). The Delaware ABL Credit Agreement provides for a
senior secured asset based revolving credit facility consisting of a revolving commitment of
$1.85 billion, which matures on March 21, 2019 (the âABL Facilityâ), and a senior secured tranche
Aâ1 âfirstâinâlastâoutâ term loan of $280 million that matures on October 24, 2019 (the âm
Mâ and together with the ABL Facility, the âDelaware Secured ABL Facilityâ).
25. The obligations under the Delaware Secured ABL Facility are secured, subject to
certain exceptions, by a first priority lien on certain of the assets of ToysâDE and the other domestic
guarantors, including, without limitation, accounts receivable, inventory, certain deposit accounts
and amounts deposited therein, and a third priority lien on the common equity shares of Toys
Canada. The obligations of Toys Canada as the Canadian Borrower under the Delaware Secured
ABL Facility are secured, subject to certain exceptions, by a security interest on certain of the
assets of the Canadian Borrower including, without limitation, accounts receivable, inventory,
certain deposit accounts and amounts deposited therein. Toys Canada has no liability under the
Delaware ABL Credit Agreement for any obligation of ToysâDE or the other US. loan parties. As
of the Petition Date, approximately $1,025 million in borrowings and approximately $91 million
of letters of credit are outstanding under the ABL Facility.
2. Secured Term Loan B Facility.
26. Toys âRâ UsâDelaware, Inc. (âToysâDEâ), as borrower, certain of the borrowers
domestic subsidiaries, as guarantors, Bank of America, NA, as administrative agent, and the
lender parties thereto, are party to that certain Amended and Restated Credit Agreement, dated as
of August 24, 2010 (as amended, novated, supplemented, extended or restated from time to time,
the âTerm Loan B Credit Agreementâ). The Term Loan B Credit Agreement provides for several
tranches of term loans, including: (a) term loans maturing on May 25, 2018, in an initial aggregate
principal amount of $400 million (the âTerm Bâ2 Loansâ); (b) term loans maturing on May 25,
13
Case 17-34665 Doc 20 Filed 09/19/17 Entered 09/19/17 04:53:46 Desc Main
Document Page 14 of 47
2018, in an initial aggregate principal amount of $225 million (the âTerm Bâ3 Loansâ); and (c)
term loans maturing on April 24, 2020, in an initial aggregate principal amount of $1,025 ,726,000
(the âTerm Bâ4 Loansâ and together with the Term Bâ2 Loans and Term Bâ3 Loans, the âW
Term Loan B Facilityâ).
27. The obligations under the Secured Term Loan B Facility are guaranteed by certain
whollyâowned subsidiaries of ToysâDE. Collateral securing the Secured Term Loan B Facility
consists, subject to certain restrictions and exceptions, of a first priority lien on the intellectual
property owned by Geoffrey, LLC, and a second priority lien on the shared collateral pledged by
the subsidiaries of ToyâDE that are guarantors under both the Delaware Secured ABL Facility and
the Secured Term Loan B Facility to the secured parties under the Delaware Secured ABL Facility
and the secured parties under the Secured Term Loan B Facility. The Term Bâ2 Loans and
Term Bâ3 Loans are secured by a second priority lien on the pledge of the common equity shares
of Toys Canada.
28. ToysâDE created the Term Bâ4 Loans pursuant to Amendment No. 3 to the Term
Loan B Credit Agreement dated as of October 24, 2014. Amendment No. 3 permitted the lenders
of the Term Bâ2 Loans and Term Bâ3 Loans to extend the maturity date of these loans by
exchanging them for Term Bâ4 Loans. Wayne Real Estate Parent Company, LLC has provided an
unsecured guarantee of the Term Bâ4 Loans. In addition to the security interests described in the
immediately preceding paragraph, the Term Bâ4 Loans are also secured by, subject to certain
restrictions, a first priority security interest in the Canadian Pledge and, after the Springing
Covenant is triggered (which shall occur on the earlier of the date on which the 7.375% Notes have
been redeemed, defeased or discharged or the removal from such 7.375% Notes of the negative
pledge covenant and any restrictions on liens related to certain specified real property), a first
14
Case 17-34665 Doc 20 Filed 09/19/17 Entered 09/19/17 04:53:46 Desc Main
Document Page 15 of 47
priority security interest in all of the Specified Real Property, subject to Permitted Liens,
Applicable Law and any restrictions or limitations under the applicable deeds, leases or real estate
contracts.
29. As of the Petition Date, approximately $123 million in aggregate principal amount
of Term Bâ2 Loans remains outstanding, approximately $61 million in aggregate principal amount
of Term Bâ3 Loans remains outstanding, and approximately $998 million in aggregate principal
amount of Term Bâ4 Loans remains outstanding.
3. US ABL and Term Loan Intercreditor
30. On August 24, 2010, Bank of America, NA, as Term Agent, and Bank of America,
NA, as ABL Agent, and the other parties thereto entered into that certain Amended and Restated
Intercreditor Agreement, dated as of August 24, 2010 (as amended, amended and restated,
supplemented or otherwise modified from time to time (including pursuant to that certain
Amendment No. 1 to Amended and Restated Intercreditor Agreement, dated as of October 24,
2014, by and among the Term Agent and the ABL Agent) the, âABLâTerm Intercreditor
Agreementâ), Which. among other things, governs the relative rights and priorities of the Term
Agent and the ABL Agent With respect to the shared collateral.
4. 8.75% Unsecured Notes.
31. On November 15, 2006, Toys âRâ Us, Inc. (âToys Inc.â) and ToysâDE coâissued
$200 million in original principal amount of 8.75% unsecured notes due September 1, 2021 (as
amended, novated, supplemented, extended or restated from time to time, the â8.75% Notesâ).
The 8.75% Notes are governed by that certain Indenture, dated as of August 21, 1991, among
ToysâDE, as issuer, and United Jersey Bank, as Indenture Trustee, as amended by and through that
certain Second Supplemental Indenture, dated as of November 15, 2006, among Toys Inc. and
ToysâDE, as coâissuers, and The Bank of New York, as successor trustee. No other Debtor entity
15
Case 17-34665 Doc 20 Filed 09/19/17 Entered 09/19/17 04:53:46 Desc Main
Document Page 16 of 47
guarantees or is otherwise obligated under the 8.75% Notes. As of the Petition Date,
approximately $22 million in aggregate principal amount of 8.75% Notes remains outstanding.
5. 7.375% Senior Notes.
32. On May 28, 2002, Toys Inc. issued $400 million of 7.375 % senior unsecured notes
due October 15, 2018 (as amended, novated, supplemented, extended or restated from time to time,
the â7.375 % Notesâ). The 7.375 % Notes are governed by that certain Indenture, dated as of
May 28, 2002, among Toys Inc., as issuer, and The Bank of New York, as Indenture Trustee, as
amended by that certain First Supplemental Indenture, dated as of May 28, 2002, among Toys Inc.,
as Issuer, and The Bank of New York, as Indenture Trustee. No other Debtor entity guarantees or
is otherwise obligated under the 7.375 % Notes. As of the Petition Date, approximately
$208 million in aggregate principal amount of 7.375 % Notes remains outstanding.
6. Propco I Unsecured Term Loan Facility.
33. Toys âRâ Us Property Company I, LLC (âPropco â) (a nonâDebtor) is the borrower
of approximately $985 million under that certain Term Loan Credit Agreement, dated as of August
21, 2013 (as amended, novated, supplemented, extended or restated from time to time, the âm
I Credit Agreementâ), among Propco I, the lenders party thereto from time to time, Goldman Sachs
Lending Partners LLC, as Administrative Agent, and the other agents and arrangers named therein.
The loan obligations under the Propco I Credit Agreement (the âPropco I Loansâ) mature on
August 21, 2019. The Propco I Credit Agreement is guaranteed by each subsidiary of Propco I.
As of the Petition Date, approximately $859 million in aggregate principal amount of Propco I
Loans remains outstanding.
7. Propco 11 Mortgage Loan.
34. On November 3, 2016, Toys âRâ Us Property Company II, LLC (âPropco I â), an
indirect whollyâowned subsidiary of ToysâDE, borrowed $512 million, due November 9, 2019,
16
Case 17-34665 Doc 20 Filed 09/19/17 Entered 09/19/17 04:53:46 Desc Main
Document Page 17 of 47
pursuant to that certain Loan Agreement among Propco II, as Borrower, and Goldman Sachs
Mortgage Company and Bank of America, NA, as the lenders party thereto (as amended, novated,
supplemented, extended or restated from time to time, the âPropco 11 Mortgage Loanâ). The
Propco 11 Mortgage Loan obligations are guaranteed by Toys Inc., and are secured by all assets
owned from time to time by Propco 11, including (i) all of Propco Hâs interest in certain real
property, and (ii) certain accounts and other related collateral of Propco 11. As of the Petition Date,
approximately $507 million in aggregate principal amount remains outstanding under the Propco
11 Mortgage Loan.
8. Giraffe Junior Mezzanine Loan.
35. On November 3, 2016, Giraffe Junior Holdings, LLC (âGiraffe Juniorâ) borrowed
$88 million, due November 19, 2019, pursuant to that certain 12.5% Mezzanine Loan Agreement
among Giraffe Junior, as Borrower, and the lenders party thereto from time to time (as amended,
novated, supplemented, extended or restated from time to time, the âGiraffe Junior Mezzanine
Iï¬â). Giraffe Junior Mezzanine Loan obligations are guaranteed by Toys Inc., and are secured
by assets owned by Giraffe Junior, including (i) 100% of the issued and outstanding limited
liability company interests in Propco II, and (ii) certain accounts and other related collateral of
Giraffe Junior. As of the Petition Date, approximately $70 million in aggregate principal amount
remained outstanding under the Giraffe Junior Mezzanine Loan.
B. International Debt Facilities and Intercreditor Agreements
1. European and Australian ABL Revolving Credit Facility.
36. TRU Europe Limited (the âEuropean Parentâ), TRU Iberia Holdings 1, S.L.U.
(the âSpanish Parentâ), TRU Australia Holdings, LLC (the âAustralian Parent,â and together with
the European Parent and the Spanish Parent, the âParent Guarantorsâ), Toys âRâ Us (UK) Limited
and Toys âRâ Us Limited (the âUK Borrowersâ), Toys âRâ US (Australia) Pty Ltd (the âAustralian
17
Case 17-34665 Doc 20 Filed 09/19/17 Entered 09/19/17 04:53:46 Desc Main
Document Page 18 of 47
Borrowerâ), Toys âRâ Us GmbH (the âGerman Borrowerâ), Toys âRâ Us Iberia, S.A.U.
(the âSpanish Borrowerâ and together with the UK Borrowers, the Australian Borrower, the
German Borrower and the Spanish Borrower, collectively, the âEuropean ABL Borrowersâ),
certain of the European ABL Borrowersâ direct and indirect whollyâowned subsidiaries, as
guarantors (the âEuropean ABL Guarantorsâ), Deutsche Bank AG New York Branch, as
Administrative Agent, Security Agent and Facility Agent, Deutsche Bank AG New York Branch
and Bank of America, NA, as CoâCollateral Agents, and the lenders party thereto from time to
time, are parties to that certain Syndicated Facility Agreement dated as of October 15, 2009, (as
amended, novated, supplemented, extended or restated from time to time, including through the
Second Amended and Restated Syndicated Facility Agreement dated as of December 18, 2015,
the âEurope Credit Agreementâ).
37. The Europe Credit Agreement provides for a senior secured revolving credit facility
with revolving commitments of £138 million, which matures on December 18, 2020 (the â@
ABL Facilityâ). The obligations under the Euro ABL Facility are secured, subject to certain
exceptions, by a first priority lien on substantially all of the assets of the Parent Guarantors, the
European ABL Borrowers and the European ABL Guarantors, including, without limitation,
accounts receivable, inventory, cash and cash equivalents, and a pledge of the common equity
shares of certain direct and indirect whollyâowned subsidiaries of the Parent Guarantors. As of
the Petition Date, approximately $84 million in borrowings are outstanding under the Euro ABL
Facility. As of the Petition Date, the aggregate borrowing base (i.e., the effective maximum
availability) under the Euro ABL Facility was $84 million.
2. Taj Senior Notes.
38. On August 16, 2016, Tru Taj LLC (âTru Tajâ) and Tru Taj Finance, Inc. (âTru Taj
Financeâ) issued $441.2 million of 12.00% senior secured notes due August 15, 2021 (as amended,
18
Case 17-34665 Doc 20 Filed 09/19/17 Entered 09/19/17 04:53:46 Desc Main
Document Page 19 of 47
novated, supplemented, extended or restated from time to time, the âTaj Senior Notesâ). The Taj
Senior Notes are governed by that certain First Supplemental Indenture, dated as of August 26,
2016, among Tru Taj and Tru Taj Finance, as coâissuers, Toys Inc. and certain of its direct and
indirect whollyâowned subsidiaries in the United States, Europe and Australia, as guarantors (the
âTaj Guarantorsâ), and Wilmington Trust, N.A., as trustee and collateral trustee. The obligations
under the Taj Senior Notes are secured, subject to certain exceptions, by a first priority lien on the
common equity shares of certain of the Taj Guarantors and certain of their subsidiaries that were
not pledged under the Euro ABL Facility, and a second priority lien on the common equity shares
of certain of the Taj Guarantors and certain of their subsidiaries that were previously pledged under
the Euro ABL Facility. As of the Petition Date, $583 million in aggregate principal amount of Taj
Senior Notes remains outstanding.
3. US ABL and Term Loan Intercreditor
39. On August 16, 2016, Deutsche Bank AG New York Branch, as First Lien Collateral
Agent, Wilmington Trust, National Association, as Collateral Trustee, as Second Priority
Representative for the Second Priority Debt Parties, and the certain of Toys Inc.âs direct and
indirect subsidiaries party to the Europe Credit Agreement, as grantors, entered into that certain
certain Intercreditor Agreement, dated as of August 16, 2014 (as amended, amended and restated,
supplemented or otherwise modified from time to time the, âTaiâEuro ABL Intercreditor
Agreementâ), which, among other things, governs the relative rights and priorities of the secured
parties under the Taj Senior Notes and the Europe Credit Agreement.
4. UK Real Estate Credit Facility.
40. On March 25, 2013, Toys âRâ Us Properties (UK) Limited (âUK Propco Iâ) and
TRU (UK) H5 Limited, as borrowers, Debussy DTC PLC as Original Lender, Elavon Financial
Services Limited, UK Branch, as Facility Agent, and US. Bank TRU STEES Limited as Security
19
Case 17-34665 Doc 20 Filed 09/19/17 Entered 09/19/17 04:53:46 Desc Main
Document Page 20 of 47
Agent entered into that certain Agreement Relating to the UK Propco Facility Agreement, (as
amended, novated, supplemented, extended or restated from time to time, including that certain
Amendment and Restatement Agreement Relating to the UK Propco Facility AG dated as of
July 24, 2013, the âUK Facility Agreementâ).
41. The UK Facility Agreement, which provides for a senior secured credit facility with
a maximum total availability of £263,159,000, matures on July 7, 2020 (the âUK Facilityâ). The
obligations under the UK Facility are secured, subject to certain exceptions, by a first ranking
priority charge on certain of the issuerâs assets and property, including, without limitation, certain
deposit accounts. As of the Petition Date, approximately $355 million in borrowings are
outstanding under the UK Facility.
5. French Real Estate Credit Facility.
42. On February 27, 2013, Toys âRâ Us France Real Estate S.A.S. (âToys France Real
Mâ), as borrower, entered into that certain â¬48 million facility agreement (as amended,
novated, supplemented, extended or restated from time to time, the âFacility Agreementâ), with
Deutsche Bank AG, acting through its London Branch as Original Lender, Arranger and Security
Agent, and Situs Asset Management Limited as Agent.
43. The Facility Agreement provides for a senior secured credit facility with a
maximum availability of â¬48 million, and matures on February 27, 2018 (the âFrench Facilityâ).
The obligations under the French Facility are secured, subject to certain exceptions, by a first
priority lien on substantially all of the assets of Toys France Real Estate, including, without
limitation, mortgages on the properties to be refinanced, assignment by way of security of rental
income generated on the properties, a pledge of any interâcompany and shareholder loans, accounts
receivable, inventory, cash and cash equivalents, and a pledge of the common equity shares of
20
Case 17-34665 Doc 20 Filed 09/19/17 Entered 09/19/17 04:53:46 Desc Main
Document Page 21 of 47
Toys France Real Estate. As of the Petition Date, approximately $54 million in borrowings are
outstanding under the French Facility.
6. Toys-Japan Bank Loans.
44. Toys âRâ UsâJapan, Ltd (âToys Japanâ) has borrowed approximately $36 million
under a syndicated bank loan (collectively the âToysâJapan Bank Loanâ), which consists of two
unsecured lines of credit. On October 31, 2014, Toys Japan borrowed ¥0.5 billion, due October 25,
2019, pursuant to the ToysâJapan Bank Loan agreement executed between Toys Japan, as
borrower, and the lender parties thereto (as amended, novated, supplemented, extended or restated
from time to time, the â2019 ToysâJapan Bank Loanâ). On January 29, 2016, Toys Japan
borrowed an additional ¥4.1 billion, due January 29, 2021. On February 28, 2013, Toys Japan
borrowed a further ¥2.0 billion, due February 26, 2012. As of the Petition Date, approximately
$40 million in aggregate principal amount remained outstanding under the ToysâJapan Bank
Loans.
45. Toys Japan also has an agreement with a syndicate of financial institutions, which
includes an unsecured committed lines of credit (âTranche 2â) expiring on June 29, 2018.
Tranche 2 is available in amounts of up to ¥9.45 billion (approximately $86 million as of
September 1, 2017). As of the Petition Date, the Company had no outstanding borrowings under
Tranche 2. As of the Petition Date, Toys âJ apan had total liquidity of $335 million under committed
facilities, which included cash and cash equivalents of $171 million.
46. In addition, ToysâJapan has two uncommitted lines of credit with Â¥1.0 billion and
Â¥0.5 billion of total availability, respectively. As of the Petition Date, approximately $36 million
in borrowings are outstanding under these uncommitted lines of credit.
21
Case 17-34665 Doc 20 Filed 09/19/17 Entered 09/19/17 04:53:46 Desc Main
Document Page 22 of 47
C. Intercompany Indebtedness
47. The Debtors and NonâDebtor Affiliates regularly engage in intercompany
transactions in the ordinary course of business, resulting in various intercompany balances, claims,
and obligations. A summary of some of the intercompany indebtedness includes:
1. Toys Inc. and Toys-DE Intercompany Credit Agreement
48. Toys Inc. is the borrower of $90 million under that certain Credit Agreement, dated
as of July 25, 2012 (as amended, amended and restated, supplemented or otherwise modified from
time to time, the âIntercompany Credit Agreementâ), among Toys Inc., as borrower, and Toysâ
DE, as lender. Pursuant to that certain Amendment No. 1 to Credit Agreement, dated as of
March 30, 2017, by and between Toys Inc., as borrower, and ToysâDE, as lender, the intercompany
loan under the Intercompany Credit Agreement matures on December 31, 2018.
2. 2006 Grid Promissory Note
49. Toys Inc. and ToysâDE are parties to that certain Promissory Note, dated as of
January 28, 2006 (as amended, amended and restated, extended, supplemented or otherwise
modified from time to time, the â2006 Grid Promissory Noteâ), which evidences the intercompany
loans made between the parties both as borrowers and lenders, and pursuant to which the parties
thereto shall offset and net any amounts owed by one party to the other under the 2006 Grid
Promissory Note. The outstanding amount of the 2006 Grid Promissory Note as of July 29, 2017
was $383,992,731 owed by Toys Inc. to ToysâDE. The 2006 Grid Promissory Note matures on
November 30, 2020.
3. 2009 Intercompany Promissory Note (Toys Inc. Borrower)
50. Pursuant to that certain Promissory Note, dated as of June 15, 2009 (as amended,
amended and restated, extended, supplemented or otherwise modified from time to time, the â2009
Promissory Noteâ), between Toys Inc., as borrower, and ToysâDE, as lender, Toys Inc. borrowed
22
Case 17-34665 Doc 20 Filed 09/19/17 Entered 09/19/17 04:53:46 Desc Main
Document Page 23 of 47
an initial principal amount of $150 million. The outstanding amount of the 2009 Promissory Note
as of July 29, 2017 was $307,091,591. The 2009 Promissory Note matures on November 30, 2020.
4. 2009 Intercompany Promissory Note (Toys-DE Borrower)
51. Pursuant to that certain Promissory Note, dated as of July 22, 2009 (as amended,
amended and restated, extended, supplemented or otherwise modified from time to time, the âï¬y
2009 Promissory Noteâ), between ToysâDE, as borrower, and Toys Inc., as lender, ToysâDE
borrowed an initial principal amount of $286,400,000. The outstanding amount of the July 2009
Promissory Note as of July 29, 2017 was $281,051,655. The July 2009 Promissory Note matures
on February 3, 2018.
5. 2012 Intercompany Promissory Note
52. Pursuant to that certain Promissory Note, dated as of July 24, 2012 (as amended,
amended and restated, extended, supplemented or otherwise modified from time to time, the â&
Promissory Noteâ), between Toys Inc., as borrower, and ToysâDE, as lender, Toys Inc. borrowed
an aggregate principal amount of $175 million. The outstanding amount of the 2012 Promissory
Note as of July 29, 2017 was $297,564,074. The 2012 Promissory Note matures on August 1,
2018.
III. The Company Today and Current Improvement Initiatives
53. Although the toy industry overall is healthy and growing, the Debtorsâ EBITDA
declined sharply in fiscal year 2013 after sales dropped by 7 percent yearâoverâyear. This drop
was primarily due to a series of organizational and operational changes, including senior leadership
turnover, undisciplined promotional activity resulting in selling product too cheap, poor inventory
management resulting in overstock, and a misaligned cost structure resulting in net losses.
Recovering from this substantial oneâyear downturn was compounded by the Debtorsâ substantial
annual debt service obligations, which direct liquidity towards interest payments that might
23
Case 17-34665 Doc 20 Filed 09/19/17 Entered 09/19/17 04:53:46 Desc Main
Document Page 24 of 47
otherwise have been used to reinvest in the business. While the Company could not easily modify
its capital structure to reduce debt obligations, under new leadership, the Company implemented
certain measures to turnaround its operations and made modifications to its inventory management
processes, and cost controls. These efforts ultimately saved the Company approximately
$325 million. The Debtors also hired new senior leaders in key business roles, and made selective
limited investments in inventory, website, and store formats.
54. Despite these improvements, expensive debt service and unrelenting competition
from eâcommerce and bigâbox retailers continue to drag on the Companyâs performance.
Practically speaking, this competition manifests itself in price wars; during the 2016 holiday
season, big box retailers slashed prices on toys and flooded marketing channels, knowing that if
they can get consumers in the door to purchase attractivelyâpriced toys, they can make up for
decreased toy revenue with other inâstore purchases. Further, online retailers such as Amazon are
not concerned with making a profit at this juncture, rendering their pricing model impossible to
compete with for a company such as Toys âRâ Us. To compete, Toys âRâ Us would have needed
to slash prices on the same toys to keep traffic coming into its stores, decreasing its revenue and
cash flows in an unrelenting race to the bottom. But Toys did not engage in this race to the bottom.
The Company does not have supplemental departments and revenue streams from which to make
up for the lost margin on selling, as do Walmart®, Target®, and Amazon®
, among others. Instead,
the Company is reprioritizing the things it does best. By making investments in marketing,
technology, the inâstore experience, and inventory flow, the Company believes it can offer
consumers a far superior experience and effectively compete in this new retail environment. These
chapter 11 proceedings and the DH) Facilities are integral to brining this vision to fruition.
24
Case 17-34665 Doc 20 Filed 09/19/17 Entered 09/19/17 04:53:46 Desc Main
Document Page 25 of 47
A. Business Operations.
55. The Debtorsâ business is seasonal, primarily focused on the fourth quarter holiday
season. The importance of executing a successful holiday season cannot be overstated. The
Debtorsâ marketing campaigns are heavily focused on driving fourth quarter sales and
approximately 40% of net retail sales occurred in the fourth quarters of 2014, 2015, and 2016. The
Companyâs overall annual financial performance is driven by sales during this period.
Accordingly, building and meeting holiday demand is an essential component of the Companyâs
business, and the Debtors believe their superior ability to create and manage increased holiday
demand sets them apart from competitors.
1. The Big Box Model.
56. The Debtors operate stores in 49 states, Canada, Puerto Rico, and Guam. They also
serve the market more broadly through eâcommerce and temporary or popâup stores. For example,
the Debtors recently returned to the Times Square area in New York City with a 2017 holiday
popâup shop.
57. The Debtors and their nonâDebtor affiliates also have franchise stores across several
international markets, including the Middle East, Asia, Europe, Australia, and Africa. As of
July 2017, the Debtors operated approximately 1,600 stores and licensed approximately 250 stores
worldwide.
25
Glnhil Star: romp
tum as. um
umâ: [swsn
âMN: I 9'. .h;
tumâ
BABiEsï¬us
Case 17-34665 Doc 20 Filed 09/19/17 Entered 09/19/17 04:53:46 Desc Main
Document Page 28 of 47
of products like diapers and formula. The Companyâs old technology infrastructure did not enable
it to offer subscription services. After significant developments, Babies âRâ Us is now in the
process of launching its own online subscription service to better compete in the marketplace.
Additionally, while Toys âRâ Us does not face large, toyâfocused competitors, Babies âRâ Us
competes with other babyâspecific retailers such as buybuy BABY®.
3. The Companyâs Sourcing and Procurement Procedures.
62. The Debtors and their nonâDebtor affiliates purchase merchandise from a wide
variety of international and domestic vendors. These wellâestablished relationships are one of the
Companyâs core strengths. In fiscal year 2016, the Debtors had over 3,600 active vendor
relationships. For many vendors, the Companyâs stores are the only yearâround dedicated platform
to showcase their brands and test new products. As part of these longâterm relationships, the
Company receives a higher allocation of inâdemand products than is provided to competitors,
certain exclusive products, advertising support, and favorable trade terms.
63. The Company utilizes the services of APL Logistics (â@011 to coordinate all
steps of the inventory purchase process related to imports from Southern China, from which 90%
of the Debtorsâ foreign imports are shipped. When an order is ready for delivery, the vendor
utilizes APLLâs online platform to inform APLL that the product is ready for shipment. APLL
then analyzes relevant information to determine how the product needs to be distributed and
provides the vendor instructions regarding how to get the product to the port, such as whether the
product should be delivered directly to the port in a shipping container or trucked to a consolidator
to build a container that is then delivered to the port. Within (on average) 48 hours of a shipping
11 The Debtors use similar providers for deliveries from other ports and for deliveries to Europe, Australia, and other
regions in which they operate.
28
Case 17-34665 Doc 20 Filed 09/19/17 Entered 09/19/17 04:53:46 Desc Main
Document Page 29 of 47
container arriving at port, it is boarded on a ship for delivery to the United States or its other
destination.
64. The Company operates 18 distribution centers, including eight supporting domestic
operations and ten supporting international operations. Shipments that arrive at port are brought
directly to these distribution centers. These distribution centers are equipped with warehouse
management systems to manage inventory levels and distribution costs. In the US, the Debtors
also have agreements with thirdâparty logistics providers including, JB Hunt Transport, Inc.,
Performance Team Freight, Systems, Inc., and DHL Supply Chain to manage warehouse
operations and deliveries to their stores. The Company maintains similar arrangements with
different vendors internationally. The Company utilizes this system to optimize ï¬exibility and
stock levels in their stores. Nonetheless, the Company is continuously refining and improving its
procurement and delivery process.
65. The Debtorsâ stores also allow them to offer their online customers unique delivery
and payment arrangements. For example, customers can buy online and pick up their purchases
in stores as little as one hour later if the item is in stock. If an item is not in stock, a customer can
pick the item up at the store later, free of shipping costs.
B. Prepetition Transactions.
1. Take Private.
66. Negative trends and developments in the retail and toy industry in 2003 and 2004
damaged the Companyâs performance and prospects. Discount and mass merchandisers with
greater financial resources and lower operating expenses drove down prices and margins in the
broader retail and toy industry. This competition and price pressure changed consumer habits,
ultimately decreasing the Debtorsâ toy sales. Around this same time, the Debtorsâ Kids âRâ Us
apparel business was underperforming. On November 17, 2003, the Debtors announced plans to
29
Case 17-34665 Doc 20 Filed 09/19/17 Entered 09/19/17 04:53:46 Desc Main
Document Page 30 of 47
close all 146 of the free standing Kids âRâ Us stores. But not all news was bad news during this
period: the Debtorsâ international division, saw an increase in net sales of 7.2 percent and
10.9 percent.
67. Facing difficult industry trends and weak performance of U.S. toy stores during the
2003 holiday season, the Company conducted a strategic evaluation of their worldwide assets.
They retained Credit Suisse First Boston (âCâSï¬â) to advise on strategic alternatives. The
Company and CSFB initially expected to separate the U.S. toy retailing business from the
Babies âRâ Us brand. CFSB led a thorough sale process for the toy retailing business. Eventually,
participants in the auction determined that it would be too difficult to separate the toy and baby
businesses and the Company determined to sell both businesses together.
68. On March 17, 2005, the Company announced a definitive agreement to sell its
worldwide operations to the Sponsors for $26.75 per share in a $6.6 billion transaction.
C. The Debtorsâ Investment in Growth Begins Today.
69. The Companyâs overleveraged capital structure has constrained it from making
necessary operational and capital expenditures, including investing in the revitalization of stores.
The Debtors cannot wait until they emerge from these chapter 1 l proceedings to make these crucial
investments. Accordingly, the DIP Financing discussed herein includes approximately
$1.0 billion of new money commitments that will allow the Debtors to make significant
operational investments and drive inâstore sales. This is not merely strategic speak from the
company, the various proposals for DIP financing that the Debtors received over the last several
weeks all indicate that the investment community is supportive of the Company and its future
business plan. Investors are providing money to support immediate investment in the business.
70. The Company also anticipates that by reconnecting customers with the
Toys âRâ Us brand and enlivening their customersâ shopping experience, they will slowly begin
30
Provide a World-Class Digital
Experience
Bring Our Transform the Babies"R"Us
Toy Stores to Life Brand
Case 17-34665 Doc 20 Filed 09/19/17 Entered 09/19/17 04:53:46 Desc Main
Document Page 32 of 47
will allow the Debtors to position more highlyâskilled and trained employees in higher value areas
in the store to conduct product demonstrations, host inâstore events, and improve the inâstore
customer experience.
2. US. Real Estate Capital Investment
73. The nicer the store, the more customers want to shop there. To revitalize their
portfolio of stores, the Debtors plan to invest $276.6 million from 2018 to 2021. This investment
will enable the Debtors to (i) convert existing stores into a âsideâbyâsideâ format to combine toy
and baby offerings, (ii) relocate, remodel and/or close targeted stores, (iii) create event and activity
spaces within existing stores to facilitate the enhancement discussed above, and (iv) develop plans
for small format stores in urban areas.
3. Technology Investment
74. Todayâs retail customer expects a seamless, easyâtoâuse, online shopping
experience. To enhance the Debtorsâ online presence and eâcommerce capacity, they plan to invest
$90.4 million from 2018 through 2021. The Debtors will use this investment to continue
developing their new, upgraded webstore, integrate digital customer loyalty programs that reward
customers for repeat business, and further bring the stores to life with âgamification,â including
augmented reality tools and increased inâstore digital content.
4. US. Supply Chain Efficiency Enhancement
75. Customers want their purchases delivered as quickly as possible. To increase
delivery speed and streamline their packingâandâshipping operations, the Debtors plan to invest
$117.8 million in capital expenditures, $37.6 million in SG&A, and $104.8 million in margin
investment from 2018 through 2021. This substantial investment will remodel the Debtorsâ supply
chain infrastructure, increase the Debtorsâ shipâfromâstore capacity and decrease delivery time to
Customers.
32
Case 17-34665 Doc 20 Filed 09/19/17 Entered 09/19/17 04:53:46 Desc Main
Document Page 33 of 47
5. Transform U.S. Baby Business
76. Despite increasing competition, Babies âRâ Us remains the industry leader in baby
registry requests. To enhance the Babies âRâ Us brand, the Debtors plan to invest $54 million
from 2018 through 2021 to upgrade inâstore product offerings and employee service levels, launch
a new Babies âRâ Us registry app, remodel the brandâs website, implement a customer loyalty
program, and create a digital concierge service that helps new and expectingâand often
overwhelmedâparents find the items they need.
6. Wage Rate Increase
Better employees make for happier customers. To recruit and retain the highest quality
workers, the Debtors plan to invest $72.4 million from 2018 to 2021 to (i) raise starting wages to
marketâcompetitive levels for store employees and (ii) ensure that employees who take on greater
levels of responsibility will be compensated appropriately.
7. Re-Prioritizing Brand Management
77. Customers are loyal to the brands that meaningfully engage them. The Debtors
plan to invest $175.2 million from 2018 to 2021 to reconnect customers with the Toys and Babies
brands. Specifically, the Debtors plan to launch a Babies âRâ Us brand campaign to reposition
Babies âRâ us as a lifestyle brand and introduce the newlyâcreated Toys âRâ Us âPLAYâ branding
strategy, relaunch an updated loyalty program integrated with customer relationship management
tools, and rollâout marketing and media plans that showcase the Debtorsâ unique, exclusive product
offerings.
8. International Expansion
78. The Debtorsâ brands are well positioned in their various international markets. To
further penetrate the Canadian, European, and Asian markets, where they already have a
substantial foothold, the Debtors plan to invest $82 million from 2018 to 2021. This investment
33
Case 17-34665 Doc 20 Filed 09/19/17 Entered 09/19/17 04:53:46 Desc Main
Document Page 34 of 47
will allow the Debtors to remodel their international portfolio of physical stores, transition to a
new internationally focused webstore, invest further in growing their Asian joint venture, and build
out their number of stores in certain European markets.
79. These initiatives are expected to streamline the Companyâs operations, revitalize
the customer shopping experience, and improve financial performance. The Companyâs ongoing
liquidity constraints have made it difficult to implement these initiatives. But the Company
anticipates that a simplified capital structure and reduced debt load postâemergence, will provide
ample liquidity to focus on these initiatives and use them to transform the Companyâs financial
performance.
D. International Debtors and Non-Debtors.
80. The Debtorsâ operations span the globe, but their organizational structure and
capital structure are effectively separated into two silos: (i) North America, including US. and
Canadian entities and credit facilities and (ii) international, including all other foreign entities and
various international and country specific credit facilities. The main parent company Toys âRâ
Us, Inc. (DE) is the only entity that sits above both the North American and International
operations and has liability on account of debt in both silos. As discussed below, the North
American entities are part of these chapter 11 cases, but the International entities are not. The
Debtors have obtained the appropriate forbearance agreements and waivers to keep these
international entities out of both these chapter 11 cases and bankruptcy proceedings in their local
jurisdictions.
1. Toys Canada and the CCAA Filing
81. Toys âRâ Us (Canada) Ltd. (âToys Canadaâ) is the Companyâs Canadian
subsidiary. While the Company has one Executive leadership team, Toys Canada, among other
things, has its own management structure, conducts its own business operations, makes its own
34
Case 17-34665 Doc 20 Filed 09/19/17 Entered 09/19/17 04:53:46 Desc Main
Document Page 35 of 47
purchasing decisions, manages its own supply chain, and procures its own vendors. Like the
foreign nonâDebtor affiliates discussed below, Toys Canada is party to an intercompany shared
services agreement pursuant to which it makes regular payments to certain of the domestic
Debtors. Toys Canada has also advanced intercompany loans to Toys Delaware and it is
anticipated this practice may continue postâpetition, subject to appropriate
protections. Additionally, the Canadian revolving credit and âfirstâin lastâoutâ (FRO) facility
(which is secured by a first lien on substantially all the property of Toys Canada) is a subâfacility
of the Delaware Secured ABL Facility; however, Toys Canada is only obligated under the
Delaware Secured ABL Facility for its own borrowings and is not a guarantor of Toys Delawareâs
obligations thereunder. It is contemplated that Toys Canada will be a borrower under the Domestic
DH) ABL Credit Facility based upon the same structure.
82. Toys Canada filed for chapter 11 protection because of its status as a borrower
under the Delaware Secured ABL Facility and a proposed borrower under the Domestic DIP ABL
Credit Facility, and because of its desire to obtain the benefit of the automatic stay in the United
States to prevent any potential creditor enforcement against it here. Given that Toys Canada is a
Canadian company and conducts its business in Canada, it will also commence a plenary
restructuring proceeding under Canadaâs Companiesâ Creditors Arrangement Act (the â%
Proceedingsâ) before the Ontario Superior Court of Justice in Toronto, Ontario (the âCanadian
mâ) to obtain the benefit of a stay of proceedings and other relief in Canada similar to that
sought on the First Day Motions, including approval of the Canadian portion of the Domestic DIP
ABL Credit Facility.
83. In light of the commencement of the CCAA Proceedings, the Debtors are also
seeking approval of a customary crossâborder insolvency protocol (the âCrossâBorder Protocolâ)
35
Case 17-34665 Doc 20 Filed 09/19/17 Entered 09/19/17 04:53:46 Desc Main
Document Page 36 of 47
With a view to ensuring effective and efficient coordination and administration of the chapter 11
proceedings and the CCAA Proceedings. I am advised by K&E that approval of such a protocol
is customary in crossâborder insolvency filings of this nature and that the form of CrossâBorder
Protocol is consistent With protocols approved in other recent U.S. chapter 11 cases.
2. The Foreign Non-Debtor Affiliates
84. The Debtors also have affiliates in 36 other countries around the globe that conduct
business under the Toys âRâ Us or Babies âRâ Us Brand names (collectively, the âNonâDebtor
Affiliates.â Similar to Toys Canada, the NonâDebtor Affiliates have their own management
structures, conduct their own business operations, make their own purchasing decisions, manage
their own supply chains, and procure their own vendors. The NonâDebtor Affiliates are also party
to various intercompany agreements, pursuant to Which they make regular payments to certain of
the domestic Debtors.
85. The international silo of the Debtorsâ capital structure includes the Euro ABL, the
Taj 12.00% Notes, and various country specific credit arrangements (each as discussed below).
While certain crossâdefault provisions in the Taj 12% Notes would generally result in a
crossâdefault on the such notes and the Euro ABL as a result of the chapter 11 filing, as part of the
DIP Financings, the requisite Taj noteholders agreed to wave and forebear from exercising any
rights and remedies on account of such default, thus guaranteeing that the Euro ABL will remain
in place on a postpetition basis to provide liquidity to the NonâDebtor Affiliates in the ordinary
course. Accordingly, the Debtors did not need to file the NonâDebtor Affiliates in these chapter 11
cases nor does the company believe that bankruptcy proceedings Will be required by law in any
foreign jurisdictions. The Company intends for operations of all NonâDebtor Affiliates, including
any intercompany transactions or services rendered in the ordinary course of business, to continue
uninterrupted during these chapter 11 cases.
36
Case 17-34665 Doc 20 Filed 09/19/17 Entered 09/19/17 04:53:46 Desc Main
Document Page 37 of 47
IV. Circumstances Leading Up to the Petition Date.
86. A conï¬uence of factors contributed to the Debtorsâ need to commence these
chapter 11 cases, including market trends and a highlyâleveraged capital structure. As discussed
in more detail below, in light of shifting consumer demand toward online marketplaces and
competition from oneâstop retailers such as Walmart® and Target®, the Companyâs revenue has
trended downwards over the past five years, decreasing profits and increasing leverage. Although
the Company has managed its complex, highlyâleveraged capital structure by refinancing its debt
obligations before they come due, the Companyâs cash debt service burden of approximately
$400 million per year is unsustainable in the current competitive environment. As a result, the
Company concluded that a comprehensive deleveraging would be required to allow the Company
to rightâsize its balance sheet, make necessary investments, and maximize the longâterm value of
the business.
87. The Company also faced certain liquidity challenges that reduced the Companyâs
strategic ï¬exibility in executing a deleveraging strategy. For example, because the Company may
not have been able to show its auditors that it would have sufficient liquidity on hand to pay the
$186 million of Bâ2 and Bâ3 Term Loans at scheduled maturity in May 2018, the Company faced
the possibility of having to make a disclosure under applicable accounting regulations that it had
âsubstantial doubtâ about the its ability to continue as a going concern. The Debtors feared that
such a disclosure would have caused substantial tightening of trade terms, exhausting the
Companyâs liquidity.
88. In the face of these liquidity concerns, the Company worked with Lazard and its
other advisors to investigate the possibility of raising approximately $200 million of incremental
liquidity. The Company and its advisors engaged with potential lenders and their advisors
regarding alternative structures to raise the necessary incremental funds, including considering a
37
Case 17-34665 Doc 20 Filed 09/19/17 Entered 09/19/17 04:53:46 Desc Main
Document Page 38 of 47
saleâleaseback transaction with certain existing lenders. Ultimately, no such liquidityâenhancing
transaction proved to be viable.
89. With the goal of implementing a comprehensive deleveraging, but without a
solution to nearâterm liquidity pressures, the Company asked Lazard, K&E, and A&M to focus on
contingency planning, including securing debtorâinâpossession financing and preparing for an
orderly chapter 11 filing. When news broke on September 6, 2017 that Toys was considering
restructuring options, including a chapter 11 filing, trade and credit insurers immediately began to
pull terms and cease shipping product. As a result, the Debtors accelerated their preparations for
these chapter 11 cases, finalized negotiations, and documented their proposed DIP financing
arrangements. Below is a more detailed description of the events, transactions, and circumstances
over the last several years, ultimately leading to this chapter 11 filing.
A. Refinancing Efforts.
90. The Company has a large and complex organizational and capital structure.
Historically, when faced with pending debt maturities, Toys has sought and obtained refinancing
of such pending debt, generally extending the maturities five to seven years to avoid making large
cash payments. Over time, this has created an everâincreasing debtâservice burden, hampering the
Debtors operational investment. The current capital structure reï¬ects these various financings and
refinancings. For example, since 2014, the Debtors have engaged in several successful refinancing
transactions to extend maturities, including:
o On August 21, 2013, Toys âRâ Us Property Company I, LLC and its subsidiaries
(âTRU Propco â) entered into the Propco 1 Term Loan Facility, providing
financing to effectively extend certain debt maturities from 2017 to 2019;
o On March 21, 2014, Toys and certain of its subsidiaries amended and restated, at
the same time, its Delaware Secured ABL Credit Facility, extending its maturity
from August 10, 2015 to March 21,2019;
38
Case 17-34665 Doc 20 Filed 09/19/17 Entered 09/19/17 04:53:46 Desc Main
Document Page 39 of 47
o On October 24, 2014, Toys amended the credit agreement for its secured term loan
facilities to provide for, among other things, the refinancing of certain loans
thereunder into the Bâ4 Term Loans. At the same time, the Company amended the
Delaware Secured ABL Credit Facility to provide the Tranche Aâ1 FEO Loan.
The proceeds of these new facilities were used to, among other things, refinance
debt maturing in 2016;
o On December 18, 2015, certain foreign Debtors amended and restated the
Euro ABL Facility, extending the maturity date of the facility from March 8, 2016
to December 18, 2020; and
o On August 16, 2016, Tru Taj LLC successfully completed a private exchange
transaction, issuing the Taj Senior Notes and eliminating maturities on certain 2017
notes and reducing the outstanding principal on certain 2018 notes.
0 On November 3, 2016, the Debtors obtained the PropCo 11 Mortgage Loan and the
Giraffe Junior Mezzanine Loan, the proceeds of which were used (along with a rent
prepayment from ToysâDelaware to Toys âRâ Us Property Company 11, LLC) to
effectively extend the maturity of debt at PropCo II from 2017 to 2019.
B. Operational and Market Considerations.
91. The Company is facing challenges to its liquidity resulting from operational
struggles, outdated technology, a failure to adapt to market changes, and aboveâmarket leases. As
outlined below, management has taken steps to begin addressing these challenges; however, they
continue to negatively impact the Companyâs financial performance.
3. Management Changes
92. Following the close of the 2013 fiscal year, the Company recognized the need to
implement broad organizational changes to confront market headwinds and drive increased
revenue. Over the next several years, the Companyâs Board of Directors conducted executive
searches and hired several new executives, including a chief financial officer in 2014 and myself,
as chief executive officer in 2015. Following my arrival, we added a new chief talent officer, a
communications and customer satisfaction officer, and a supply chain officer in 2015, a chief
technology officer in 2016, and a general counsel and a chief marketing officer in 2017.
39
Case 17-34665 Doc 20 Filed 09/19/17 Entered 09/19/17 04:53:46 Desc Main
Document Page 40 of 47
93. Additionally, the Board of Directors and management began making shortâterm and
longâterm strategic changes to, among other things, the Companyâs inventory and supply chain
process, website and IT platform, and store formats. Additionally, the Company invested in and
expanded to strategic geographic markets to stabilize and grow topline sales. Yet, despite the
Companyâs best efforts, the overall revenue trend in the United States has been downward as the
Company has struggled to maintain market share and compete in the changing retail environment.
4. Challenging Operating Environment.
94. The Company, like many other apparel and retail companies, is facing a challenging
environment as a result of pressure from competitive big box retailers and the general market shift
towards online shopping. These factors have left the Company with a relatively high cost structure
coupled with decreasing revenues, resulting in diminishing cash flow. Further, the Companyâs IT
platform did not, until recently, allow them to provide consumers with certain advantageous
purchase options, such as weekly subscription deliveries of disposable baby products, which
features are a staple of their competitorsâ offerings. The inability to provide this service allowed
other retailers to take market share from the Company. These trends, along with deep discounting
to drive inâstore sales, contributed to a 3.4 percent decrease in revenue during the 2016 holiday
season as compared to the 2015 season, and negative or declining sameâstore sales trends. This
trend has continued into 2017. As of Q2 2017, the Debtorsâ sameâstore sales have declined 4.3%.
5. Real Estate Expenses.
95. The Debtors are burdened by aboveâmarket leases on massive retail stores. These
leases are a substantial burden on the Debtorsâ operations and profitability. In recent years, the
Debtors have capitalized on naturallyâterminating leases to reduce their store count or square
footage, in some cases combining Babies âRâ Us and Toys âRâ Us retail stores under one roof.
As a result of rent savings to the Debtors and convenience to shoppers, these combined stores have
40
Case 17-34665 Doc 20 Filed 09/19/17 Entered 09/19/17 04:53:46 Desc Main
Document Page 41 of 47
substantially outperformed preexisting separate store structures. The Company intends to migrate
additional stores to a sharedâroof or smaller store footprint model.
96. The Debtors are currently performing a detailed review of their real estate portfolio,
identifying underperforming stores and aboveâmarket leases as part of an overall strategy to reduce
and optimize their existing store footprint. The Debtors believe that they can utilize these
chapter 11 cases to close underperforming stores and renegotiate lease terms of other stores to
reduce rent to current market terms. Additionally, the Debtors intend to utilize this opportunity to
create more combined stores and open some smallerâfootprint stores, which the Debtors believe
will outperform the existing store structure. These efforts have, and will continue to, increase
profit from operations.
C. Preparations for Chapter 11 Proceedings.
97. In anticipation of a potential goingâconcern notation in their second quarter 2017
lOâQ, the Debtors began to prepare for these chapter 1 1 cases and to negotiate debtorâinâpossession
financing to ensure that the Debtors would be able to obtain the liquidity necessary to build their
seasonal inventory if trade vendors began to pull terms. K&E, A&M, and Lazard worked with the
Debtors and various stakeholders to prepare for this scenario.
98. As discussed above, on September 6, 2017, a news article stating that the Company
was considering all strategic options, including a potential restructuring, was published. This news
story was picked up by media outlets around the world and appeared on national television shows
within hours. Within 72 hours, a significant percentage of the Debtorsâ vendors called the
Company to inform the Debtors that they would not ship product without cash on delivery. In
addition, as discussed above, the Companyâs international credit insurers withdrew their coverage.
The impact on the Companyâs supply chain was fast and furious. Within a week, 40 percent of the
Debtorsâ supply chain refused to ship product and 10 days later, practically all of the Debtorsâ
41
Case 17-34665 Doc 20 Filed 09/19/17 Entered 09/19/17 04:53:46 Desc Main
Document Page 42 of 47
vendors had refused to ship without cash on delivery. The Company lost its access to product
during the critical shipping period to build inventory for the holiday season.
99. The Debtors and their advisors worked feverishly during this period to finalize the
terms of a debtorâinâpossession financing facility to ensure that the Debtors would have sufficient
liquidity to reactivate their supply chain, build inventory, and fund these chapter 11 cases. In a
relatively tight timeâframe, the Debtors and their advisor conducted a robust marketing process,
receiving 11 proposals from existing lenders and thirdâparties. Negotiations over the terms of these
proposals provided the Debtors with clear insight into the available market terms and allowed the
Debtors to procure the best available terms under these circumstances. The Debtors believe that
DIP Facilities (as defined below), will provide them with sufficient liquidity to stabilize operations,
implement their holiday business plan, and negotiate a consensual plan of reorganization with their
lenders. Before the proverbial ink was dry on the DIP Documents, the Debtors initiated these
chapter 11 proceedings, seeking to stabilize operations and approval of their first day relief.
Failure to do get such relief now will jeopardize the entire holiday season.
V. The Proposed DIP Financing.
100. As described in detail in the Kurtz Declaration, to ensure adequate liquidity during,
and fund the administration of, these chapter 11 cases, the Debtors engaged in an intense,
wellâorganized, and extremely competitive marketing process have negotiated three debtor in
possession financing facilities (collectively, the âDHâ Facilitiesâ):
A. North American DIP ABL/FILO Facility. JP. Morgan Chase Bank, NA (âï¬
Morganâ) acting as Administrative Agent and Collateral Agent, for itself and a
syndicate of financial institutions, has agreed, together with four arrangers led by
JP. Morgan as lead arranger (together, the âJPM Lead Arranger Groupâ), to make
available a debtorâinâpossession ABL facility to ToysâDE and Toys Canada in order
to fund the Debtorsâ North American operations. Specifically, the JPM Lead
Arranger Group will make available a $2.3 billion postpetition DH) ABL credit
facility consisting of a $1,850 million ABL ($1,300 million of which on an interim
basis) and a $450 million FILO senior secured term loan, which will be used to
42
Case 17-34665 Doc 20 Filed 09/19/17 Entered 09/19/17 04:53:46 Desc Main
101.
Document Page 43 of 47
refinance existing obligations under the Prepetition ABL Facility in full and for
general corporate purposes (the âDomestic DIP ABL Credit Facilityâ). The
Domestic DIP ABL Credit Facility contains a subâfacility which provides a $300
million tranche for Canadian operations, which is lent only against Canadian assets
and inventory. Toys Canada has no liability under the Domestic DIP ABL Credit
Facility for any obligation of ToysâDE or the other U.S. loan parties. The Domestic
DIP ABL Credit Facility will be integrated into the Debtorsâ current cash
management system,
. North American Term Loan DIP. An ad hoc group of Prepetition Term Loan
Lenders have agreed to provide a $450 million ($350 million new money term loan
to Toys âRâ Us, Inc. (the âDomestic DIP Term Loanâ and, collectively with the
Domestic DIP ABL Credit Facility, the âDomestic DIP Facilitiesâ), which will
provide an additional source of liquidity to be used for general corporate purposes,
including the administration of these chapter 11 cases.
. International Term Loan and Default Forbearance. An ad hoc group of Taj
Noteholders have agreed to provide $375 million in incremental notes to support
the Debtorsâ international operations. (the âInternational DIP Term Loanâ). The
group of Taj Noteholders also agreed to waive certain defaults under the Prepetition
Taj Notes and to forbear from exercising rights and remedies pursuant to a default
against the Debtors (the âTaj Waiverâ).
The Taj Waiver will allow the Debtorsâ prepetition Euro ABL Facility to remain in
place and continue to be a source of liquidity to the Debtors in the ordinary course
of business.
The DIP Facilities are critical to the Debtorsâ ability to operate postpetition and
make necessary investments in their operations. These facilities will enhance the Debtors liquidity
by almost $1 billion, ensuring that the Debtors will have sufficient liquidity to maintain the free
flow of inventory to the Debtorsâ stores and customers, make operational and strategic
improvements, and fund the administrative costs of these chapter 11 cases. Based on my personal
knowledge and extensive discussions with the Debtorsâ management team and advisors, Ibelieve
that the DH) Facilities provide the Debtors sufficient liquidity to stabilize their operations and fund
the administration of these chapter 11 cases as the Debtors seek to implement the goingâconcern
restructuring of their business. Based on my conversations with Lazard, I also understand that the
approximately $96.5 million in aggregate fees to procure the DH) Facilities (approximately
43
Case 17-34665 Doc 20 Filed 09/19/17 Entered 09/19/17 04:53:46 Desc Main
Document Page 44 of 47
3 percent of the financing amount) is reasonable under the circumstances. Finally, based on
extensive discussions with the Debtorsâ advisors and my own participation in the DH) financing
process, I believe that the DIP Facilities are on the most favorable terms available in light of the
circumstances of these chapter 11 cases, present the best reasonable path to the Debtorsâ goingâ
concem reorganization, were negotiated in good faith and at armsâ length, and will allow the
Debtors to maximize the value of their estates for the benefit of all parties in interest.
102. Importantly, the DIP Facilities include very few case controls. Specifically, the
only terms that can be viewed as case controls are the conditions to the DIP Facilities that:
0 not later than 5 days after the Petition Date, the interim order approving the DIP Facilities
shall have been entered by this Court and the Canadian initial order shall have been entered
by the Canadian Court;
0 not later than 45 days after the Petition Date, the final order approving the DH) Facilities
shall have been entered by this Court; and
0 not later than 30 days after the Petition Date, the entry of the Canadian initial order, the
Canadian comeback motion shall have been heard and resolved by the Canadian Court.
103. With more than $3.1 billion in new financing commitments in hand, including
significant capital to immediately invest in operations, the Company has an opportunity to stabilize
operations and reset its balance sheet. This is exactly what chapter 11 is intended to accomplish
and exactly what the Company intends to do. The DH) Facilities will provide the foundation for
negotiations over a massive deleveraging and further investment in the businesses that will ensure
the iconic Toys âRâ Us brand stays viable for years to come, preserving the Debtorsâ estates for
the benefit of all of their stakeholders and saving the jobs of the Debtorsâ over 100,000 regular and
seasonal employees.
[Remainder of Page Left Intentionally Blank]
44
Case 17-34665 Doc 20 Filed 09/19/17 Entered 09/19/17 04:53:46 Desc Main
Document Page 45 of 47
Pursuant to 28 U.S.C. § 1746, I declare under penalty of perjury that the foregoing
statements are true and correct to the best of my knowledge, information, and belief.
Dated: September 19, 2017 /s/ David A. Brandon
David A. Brandon
Chairman of the Board and Chief Executive
Officer of Toys âRâ Us, Inc.
Case 17-34665 Doc 20 Filed 09/19/17 Entered 09/19/17 04:53:46 Desc Main
Document Page 46 of 47
Exhibit A
Corporate Organizational and Capital Structure
mm
mm
M?)
mu.
m." WWW
â Mmâ:- uzâ W
mu. nu. nu 25x
">1 m
m 95mm
.. Ewan:
my: Y m,
hm, m,
M)
m m... (Vumnll
u:
[nil 4w)
w. .u
vm'l' u.
(âmil
mum
[mm
m m um
um.
(m
mm:
mum:
nu Uipanl
nun»
mm m,
m m, u:
an
am. my
mm.» .1; main m
m m
W,â an...â
MM MM V â1'
mm n: M Wm
Emu.â (my "x,
m..."
um.)
â m: m us
4M
rm m
mm
m mm»
Id: 1 m
mu
um um
w. z m
nu (unm-
mm
(m
mu m...
Niumn n m
w. (âmy
«I i
m...» m:
lâââ=âââ\
n.
wp'l' m
w -.- u,
M. hm
hm. mummy.
3" 45m.)
um,
om. Var'tâun m1"
sun
J
mm 1:131
m mm mmâ. ~15- .4
mm mm My mm
um. um
ammuw
m. (uni?
umm
l'wawi'!
âmy mums Imwa
m A mm m"...
â â âK I!!!) Iâ)
mu my (Mum)
Hâlw M 5â1an
Fââl_
mam» V-v-m'm m..-
M.m., mm, mm
mm [mm umuu W. m
(M, 4m "mild I.
tm'u'm vm'rm
mum)
Fin-7;.) â4:2â?an
m1.â 1071'!qu
(my mum
(m
m
ummwmm ârmhmmlmzm
1mm.â rxmduumwmw
I Almuelnxsoï¬lur - rmminnmumm
mxsumznzmaum
mum-mm. -
Wuwmw
ux luâ sumo.â I 7 mus senqu Nmudu:
mmâ: mm nun. mum.â
mume -
_ m mmum «aunt:wa
Mm mmmw
.1 W
cm. luv-hr Mumm-
âm duezmsww
- Euw mm mu
- nah-Ir
m m M
[j g M I. w