Toys “R” Us – Court Confirms Plan of TAJ and TRU Inc. Debtors Following Comprehensive Settlement Agreement

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December 17, 2018 – The Court hearing the Toys “R” Us, Inc. case confirmed the Chapter 11 Plan of affiliate Debtors Taj and TRU Inc. [Docket No. 5979]. This follows on the heels of a comprehensive settlement reached last week  amongst (i) the Debtors, (ii) Toys (Labuan) Holding Limited (the “Asia JV”), (iii) the TRU Non-Debtor Subsidiaries, (iv) the Ad Hoc Group of B-4 Lenders, (v) the Taj Holders Steering Group, and (vi) the Debtors’ Official Committee of Unsecured Creditors (the “Intercompany Settlement Agreement”). 

As the Debtors stated [Docket 5922], “After more than a year of inter-silo disputes related to a multitude of issues, the Debtors, their key stakeholders, and the Official Committee of Unsecured Creditors (the ‘Creditors’ Committee’) have reached a comprehensive agreement reflecting a balanced resolution of all issues, thereby paving the way for the conclusion of these cases. Among other things, the intercompany settlement agreement resolves all matters concerning licensing agreements between Toys (Labuan) Holding Limited (the ‘Asia JV’), its subsidiaries, and Geoffrey, LLC (‘Geoffrey’), source-code-ownership, private-label goods and trademarks, and all other intercompany issues (including professional-fee allocation).

Key provisions of the Intercompany Settlement Agreement include:
 
  • Geoffrey will enter into new license agreements with the Asia JV and certain of its subsidiaries, as well as the French business.
  • The new license agreements will have a fixed 15-year term, subject to extension by the Asia JV after the 15-year term, and will have other amended terms as set forth in the Settlement Agreement.
  •  The Asia JV and/or its subsidiaries will pay Geoffrey a 2% net royalty rate under the new licensing agreements.
  •  The Asia JV will relinquish its rights to $26,279,192 it claims it is owed by Geoffrey under the Subsidy Agreement.
  • The Asia JV or its subsidiaries will pay $3,720,808 to Geoffrey on the effective date of the Plan.
  • The Asia JV and/or its subsidiaries will pay $6,000,000 to Toys “R” Us – Delaware, Inc. (“Toys Delaware”) on April 30, 2019.
  • The Taj Debtors will pay Toys Delaware $3 million in settlement of certain professional fee allocation disputes.
  • Toys Delaware will deliver the Source Code and Oracle Data to the Asia JV or its subsidiaries, which, following receipt of the Source Code and Oracle Data, will pay Toys Delaware $5 million, plus unpaid invoiced amounts under the ITASSA (which total approximately $7.6 million).
  • Toys Delaware will enter into a transition services agreement to provide existing IT services to the Asia JV or its subsidiaries, as well as transition and migration services set forth in the Settlement Agreement or appended Statement of Work, and the Asia JV or its subsidiaries will pay Toys Delaware a $1.5 million monthly fee payable as of December 1, 2018.
  • Geoffrey and the Asia JV will work in good faith to document their future private label relationship, including the Asia JV’s ability to source private-label goods and use trademarks, based on certain agreed-upon principles set forth in the Settlement Agreement.
  • Funds of MAP 2005 Real Estate, LLC (“MAP 2005”) will be used to resolve certain intercompany fee allocation disputes, including through payment to Toys Delaware of $1.25 million, as well as payment to the Taj Debtors of $1.25 million.
  • The Taj Debtors and Taj Noteholders will provide a $1.25 million payment to be contributed to TRU, Inc. as a fund for creditors of TRU Inc. (to be distributed in accordance with the Intercompany Settlement Agreement and Plan) (the “Taj Settlement Consideration”).
  • The Ad Hoc Group of B-4 Lenders and the Creditors’ Committee will withdraw their objections to the Plan.
  •  Each Debtor will mutually release each other Debtor of all intercompany claims and causes of action (except those explicitly reserved).
  • The Taj Debtors and the Asia JV and its direct and indirect subsidiaries will exchange mutual releases with the TRU Inc. Debtors, Toys Delaware Debtors, and Geoffrey Debtors.
The following is an amended summary of classes, claims, voting rights and class treatment of the TRU Inc. Debtors (defined terms are as defined in the Plan):
 
  • Class A1 – (“Other Secured Claims”) is unimpaired, deemed to accept and not entitled to vote on the Plan.
  • Class A2 – (“Other Priority Claims”) is impaired, deemed to reject and not entitled to vote on the Plan.  Holders shall receive their pro rata share of the TRU Inc. Silo Recovery, if any, after paying in full in cash all Senior Claims.
  • Class A3 – (“Taj Senior Notes Guaranty Claims”) is impaired and entitled to vote on the Plan. The claims shall be allowed in the aggregate principal amount of $582,749,000 and, pursuant  to  the  Global  Settlement  Agreement,  each holder shall be  deemed  to  waive  such  Holder’s  right  to 
    receive any recovery from the TRU Inc. Debtors.
  • Class A4 – (“Propco II Mortgage Loan Guaranty Claims”) is impaired and entitled to vote on the Plan. The Propco II Mortgage Loan Guaranty Claims shall be allowed in the aggregate principal amount of $31,035,540.89 and each Holder shall receive its pro rata share of the TRU Inc. Silo Recovery, if any, after paying in full all Senior Claims and on a pari passu basis with other Allowed Class A3- A8 claims to the extent set forth in the Priority Waterfall.
  • Class A5 – (“Giraffe Junior Mezzanine Loan Guaranty Claims”) is impaired and entitled to vote on the Plan.  The Giraffe Junior Mezzanine Loan Guaranty Claims shall be allowed in the aggregate principal amount of $70,295,816.47 (plus allowed interest, fees and other amounts payable under the Giraffe Junior Mezzanine Loan Agreement) and each Holder shall receive its pro rata share of the TRU Inc. Silo Recovery, if any, after paying in full all Senior Claims and on a pari passu basis with other Allowed Class A3- A8 claims to the extent set forth in the Priority Waterfall.
  • Class A6 – (“7.375% Senior Notes Claims”) is impaired and entitled to vote on the Plan.  The 7.375% Senior Notes Claims shall be Allowed in the aggregate principal amount of $208,340,000, plus Allowed interest, fees and other amounts payable under the 7.375% Senior Notes and each Holder shall receive its pro rata share of the TRU Inc. Silo Recovery, if any, after paying in full all Senior Claims and on a pari passu basis with other Allowed Class A3- A8 claims to the extent set forth in the Priority Waterfall. 
  • Class A7 – (“8.75% Unsecured Notes Claim”) is impaired and entitled to vote on the Plan. The 8.75% Unsecured Notes Claims shall be Allowed in the aggregate principal amount of $21,673,000, plus Allowed interest, fees and other amounts payable under the 8.75% Unsecured Notes and each Holder shall receive its pro rata share of the TRU Inc. Silo Recovery, if any, after paying in full all Senior Claims and on a pari passu basis with other Allowed Class A3- A8 claims to the extent set forth in the Priority Waterfall. 
  • Class A8 – (“General Unsecured Claims”) is impaired and entitled to vote on the Plan. Each Holder shall receive its pro rata share of the TRU Inc. Silo Recovery, if any, after paying in cash all Senior Claims and on a pari passu basis with other Allowed Class A3 – A8 Claims to the extent set forth in the Priority Waterfall; provided however that, for the avoidance of doubt, pursuant to section 3.2(k) of the Settlement Agreement, any Allowed Claims (including Intercompany Claims) held by Toys Delaware shall not participate in or receive any distributions from the Non-Released Claims Trust allocated to creditors of TRU Inc. as set forth therein, provided, further, however, that the treatment of Toys Delaware’s Intercompany Claim against TRU Inc. shall be as set forth in the Global Settlement Agreement.  
  • Class A9 – (“TRU Inc. Debtor Intercompany Claims”) is impaired/unimpaired, deemed to accept/reject and not entitled to vote to accept or reject the Plan. Each TRU Inc. Debtor Intercompany Claim against another TRU Inc. Debtor shall be reinstated or canceled and released, subject to the Global Settlement Agreement. 
  • Class A10 – (“TRU Inc. Intercompany Interests.”) is impaired/unimpaired, deemed to accept/reject and not entitled to vote on the Plan. 
  • Class A11 – (“TRU Inc. Interests.”) is impaired and entitled to vote on the Plan. 
 
The following is the amended summary of classes, claims, voting rights and class treatment of the Taj Debtors (defined terms are as defined in the Plan):
 
  • Class B1 – (“Other Secured Claims”) is unimpaired, deemed to accept and not entitled to vote on the Plan. 
  • Class B2 – (“Other Priority Claims”) is unimpaired, deemed to accept and not entitled to vote on the Plan. 
  • Class B3 – (“Taj Senior Notes Claims”) is impaired and entitled to vote on the Plan. The Taj Senior Notes Claims shall be allowed in the aggregate principal amount of $582,749,000 (plus Allowed interest, fees and other amounts payable under the Taj Senior Notes Indenture). Each Holder shall receive its pro rata share of: (i) the Liquidation Proceeds, if any, after paying in full all Senior Claims, (ii) the Sale Proceeds, if any, after paying in full all Senior Claims and (iii) the Initial Shares and Subscription Rights.
  • Class B4 – (“General Unsecured Claims”) is impaired and entitled to vote on the Plan. Each holder  shall receive its pro rata share of: (i) the Liquidation Proceeds, if any, after paying in full all Senior Claims and (ii) the Sale Proceeds, if any, after paying in full all Senior Claims. 
  • Class B5 – (“Taj Debtor Intercompany Claims”) is impaired/unimpaired, deemed to accept/reject and not entitled to vote to accept or reject the Plan. 
  • Class B6 – (“Taj Debtor Intercompany Interests) is impaired/unimpaired, deemed to accept/reject and not entitled to vote to accept or reject the Plan. 
  • Class B7 – (“Interests in TRU Europe.”) is impaired and entitled to vote on the Plan. Each holder  shall receive its pro rata share of: (i) the Liquidation Proceeds, if any, after paying in full all Senior Claims and (ii) the Sale Proceeds, if any, after paying in full all Senior Claims. 

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