Toys 'R' Us says 'making every effort' to pay vendors

By Tracy Rucinski

(Reuters) - Toys 'R' Us said at a bankruptcy court hearing on Tuesday that it was working hard to maximize payments to suppliers and lenders, as it starts to shutter 735 big-box toy stores across the United States.

More than 50 suppliers, including Barbie maker Mattel and Lego, have objected in some form to the proceedings by the storied toy retailer to liquidate its U.S. business, putting 30,000 jobs at risk.

Toys 'R' Us had been trying to reorganize under U.S. Chapter 11 but last week said those efforts had failed and it was quickly running out of cash. It is also winding down its U.K business, but is looking for a buyer for operations in Canada, Europe and Asia.

Some trade vendors are demanding the company return any unpaid inventory rather than selling it and using going out of business sales to pay secured lenders and bankruptcy lawyers, at their cost, court papers showed.

"We're making every effort to make sure (trade vendors) will be paid in full," Lazard's David Kurtz, who is advising Toys 'R' Us, testified at a hearing at U.S. Bankruptcy Court in Richmond, Virginia.

The company is seeking approval for a March 26 deadline for bids for each of its foreign businesses, minus U.K., followed by an auction on March 29.

It is also seeking approval for a series of U.S. liquidation procedures including a halt to more than $450 million in supplier payments as part of a plan that experts told Reuters could cause many small toy makers to disappear.

Toys 'R' Us was the last remaining speciality toy retailer in the United States. Hundreds of companies relied on its big-box stores as a showcase for both innovative toys as well as classics.

Under trade agreements, vendors were required to ship goods to Toys 'R' Us on unsecured trade credit.

In a court filing, Lego said any "wind-down must be implemented in a manner that is fair and equitable to all" of the company's creditors.

The U.S. Trustee, a bankruptcy watchdog, has also objected, saying that while it is "resigned" to the company's future, it is concerned about certain of the procedures and relief proposed as part of the liquidation.

Toys 'R' Us financial advisor Bill Kosturos of Alvarez & Marsal was also testifying at the hearing before U.S. Bankruptcy Judge Keith Phillips, which could run into Wednesday.

(Reporting by Tracy Rucinski; Editing by David Gregorio)