Toys “R” Us Burdened by Bond Yield

Investors are concerned that Toys “R” Us Inc. (Wayne, N.J.), currently paying the highest yields among 16 issuers of CCC+ rated bonds, may be unable to deal with its $2.85 billion when the notes mature in 2017.

Bloomberg News said the company’s $450 million of 10.375 percent notes, maturing in August 2017, yield 15.9 percent. Martin Fridson, a researcher specializing in high-yield debt, said that a 15 percent yield usually indicates a 33 percent risk of default within one year.

The toy retailer saw sales fall 6 percent in the 39 weeks ended Nov. 2, 2013, and its net loss quadrupled, to $829 million. During the holiday season, its sales gain of 2.7 percent was its smallest since 2009 and shopper traffic declined 15 percent in its 879 U.S. stores and 705 international locations in 35 other countries.

“[Toys “R” Us] has a successful track record of refinancing and, at this time, has no outstanding debt repayments due until 2016, providing a large window to grow and develop new strategic initiatives,” the company wrote in an e-mailed statement.