New Toys CEO to talk with investors

July 29--The investment community will be introduced to new Toys "R" Us Chief Executive Officer David Brandon on Thursday, and his first order of business will be to reassure any investors nervous about a news report that said two credit insurers were eliminating some coverage for the Wayne-based retailer.

Toys "R" Us, in a news release Tuesday, said that report contained erroneous information.

Bloomberg News reported Monday that credit insurers Coface SA and Euler Hermes Group, which protect suppliers who ship goods to retailers if a retailer fails to pay, was declining to provide credit insurance for some Toys "R" Us accounts. Bloomberg also reported that Toys "R" Us "has been seeking additional restructuring advisers" and said the two developments signal "mounting troubles" at the retailer.

Coface SA and Euler Hermes Group did not immediately respond Tuesday to requests for comment.

Analysts from JPMorgan and Goldman Sachs issued reports Monday backing Toys "R" Us, and said the retailer didn't appear to have any problems that would keep it from receiving merchandise on credit.

"We do not believe that [Toys "R" Us] will have any issues funding its seasonal working capital needs," said Goldman Sachs Global Investment Research in a note to investors. A note from JPMorgan analyst Carla Casella called Toys "R" Us' liquidity "a lot stronger than recent press implies." Both investment firms noted that Toys "R" Us has more than $1 billion in liquidity to cover inventory costs as it prepares for the holiday season.

The analysts said credit insurers typically might tighten terms as Toys "R" Us stocks up on inventory in preparation for the holidays.

Toys "R" Us said Tuesday that Brandon and other company executives would speak via conference call and in person with investors Thursday about the company's "Fit for Growth" initiative, and how the company plans to transition from recent cost cutting to "growth generation." A spokeswoman for Toys "R" Us said the call will not be open to the public or the media.

While Toys "R" Us is a private company, its debt is traded publicly, and it is required to issue financial reports and make itself available to investors.

Brandon, 63, was hired in June by the three investment firms that bought Toys "R" Us in a leveraged buyout in 2005. They are Bain Capital, KKR & Co. and Vornado Realty Trust. Brandon, a former CEO at Domino's Pizza Inc., is believed to have been chosen for the job because of his success in steering two companies through initial public offerings – Domino's in 2004 and direct-mail company Valassis in 1992.

Bain, KKR and Vornado's original game plan for Toys "R" Us was a stock offering within four to five years of the leveraged buyout.

But a weak economy and disappointing financial results at Toys "R" Us delayed that strategy. A proposed IPO was withdrawn by the company in 2013. Gerald Storch, the executive originally brought in to lead the company to a successful stock offering, resigned the same year. He was replaced by Antonio Urcelay, who retired when Brandon was hired. Brandon began his new job with Toys "R" Us in the beginning of July.

Email: [email protected]

___

(c)2015 The Record (Hackensack, N.J.)

Visit The Record (Hackensack, N.J.) at www.NorthJersey.com

Distributed by Tribune Content Agency, LLC.