Toys ‘R’ Us’ Christmas wish: debt refinancing

Toys ‘R’ Us wants its Christmas present early — thanks to the hot credit markets.

The retailer’s powerful owners — KKR, Bain Capital and Vornado Realty Trust — have hired Goldman Sachs to help negotiate a debt refinancing, two sources close to the situation said.

The talks are in very early stages.

They have not presented terms yet.

The 1,585-store chain lost $198 million in the three months ended May 3 — and is carrying a debt load of nearly $5 billion.

The Wayne, NJ, chain is in no danger of running out of cash, as it still had nearly $1 billion in borrowing capacity as of May 31.

The talks were started at this time to take
advantage of the strong credit markets, sources said, and to head off any potential problems down the road — particularly if the chain had a poor Christmas.

Some of the more junior Toys debt is trading at about 85 cents on the dollar, indicating there is some financial stress.

The most pressing next principal payment is $1 billion — but it is not due until the fall of 2016.

By refinancing now before the important holiday season, Toys would likely have to pay a higher interest rate and pledge more of its real estate, but be able to erase its 2016, and perhaps 2017, debt payment.

If it waits, Toys could, with a good holiday season, find it less expensive to refinance. However, if sales fall, refinancing at all may be a problem.

“We will be relatively constructive,” a Toys lender told The Post, adding that he likes some of the chain’s recent moves.

“They cleared aged inventory and took big markdowns,” the lender said. “We’ve done some store checks and they look better.”

KKR and Bain declined comment. Vornado could not be reached.