More than 3,000 British jobs at risk as Toys R Us UK is put up for sale

Turnaround firms are circling the stricken Toys R Us chain as the retailer’s precarious financial position puts more than 3,000 high street jobs at risk.

Last year Toys R Us, a subsidiary of the bankrupt US chain, won a stay of execution after landlords took back the keys to 26 shops and accepted less rent for those that stayed open.

But that rescue plan has now been torn up after advisers working on the financial restructuring of the US parent group hoisted the for sale sign over the loss-making UK business as well its other European stores. Industry sources said the company, which has 3,200 staff in the UK, wanted to conclude a deal before the end of the month – when several payments fall due.

It is understood 2018 trading has started poorly, with weak UK sales compounded by the disappointing picture emerging from the US where toy giants Hasbro and Mattel both reported disappointing figures after a tough Christmas trading period.

On Thursday Sky News reported that Hilco, the restructuring firm which bought HMV out of administration in 2013, was among a small group of bidders circling Toys R Us. Analysts said restructuring experts like Hilco tended to wait for businesses to collapse into administration before making their move.

In September Toys R Us’s American parent filed for bankruptcy protection in the US and Canada after running up $5bn (£3.7bn) of debts and struggling to compete online. It is currently trying to restructure its loans and finances. In January the retailer said it would close 180 of its US stores.

The UK chain has been struggling for the same reasons as its parent, as shoppers shun the large out-of-town sheds that are synonymous with the Toys R Us brand, in favour of buying online or in supermarkets. The retailer has been loss-making for seven out of the past eight years, with the most recent accounts filed at Companies House showing an operating loss of £500,000 on sales of £418m in the year to January.

Last year’s CVA process was complicated by tense negotiations with the Pension Protection Fund, the state-backed pensions lifeboat, which wanted to secure cash up front to fill the hole in the retailer’s pension fund. The scheme has 600 members and a deficit of about £30m under the PPF assessment, or as much as £93m on the basis of a buy-out by an insurer.

The company agreed to pump more than £9m into the pension fund over the next two years. It made a £1.1m payment in January but another one of the same size is due in April.