August 8, 2018 – The Court hearing the Toys “R” Us case has approved a comprehensive settlement agreement amongst certain Toys “R” Us Debtors and key stakeholders (“the Settlement Agreement”) [Docket No. 4083]. As previously reported [Docket No. 3814], “After months of intense, hard fought, arm’s-length negotiations following the announcement of the wind-down of the Debtors’ U.S. operations on March 15, 2018, certain Debtors and their key stakeholders have reached a comprehensive agreement. This agreement paves the way for resolution of certain Debtors’ chapter 11 cases, maximizes stakeholders’ recoveries, and avoids the lengthy, complex, and expensive litigation of myriad disputed issues among secured, administrative, and unsecured creditors that would inevitably ensue in the absence of a settlement—to the detriment of all parties-in-interest….Among other things, the Settlement Agreement resolves potential Claims and Causes of Action that could be asserted by the Creditors’ Committee (on behalf of the Debtors’ estates) or by other parties against the B-4 lenders. In exchange for this resolution, the Settlement Agreement provides significant benefits to creditors. First, it contemplates a significant cash payment for the benefit of Administrative Claim Holders—along with the potential for increased recoveries through preserved litigations and contingent sharing arrangements—facilitated by the Prepetition Secured Lenders’ consent to carve out significant value from their collateral and the superpriority administrative claims granted to such lenders as adequate protection. Second, it provides a waiver of all preference actions against prepetition unsecured creditors as well as postpetition creditors and vendors (other than any vendors who choose to opt-out). Third, the Settlement Agreement specifically preserves all potential claims and causes of action against the North American Debtors’ directors, officers, and managers (including Sponsor-appointed directors, officers, and managers), and transfers such claims, along with other avoidance actions, to a trust for the primary benefit of holders of Administrative Claims. Finally, the Settlement Agreement also provides certainty to the Prepetition Secured Lenders, and provides for mutual releases of claims among creditor constituencies in addition to the estate releases of Claims and Causes of Action against creditors.” Under the Settlement Agreement, “Toys Delaware will repay the Term DIP Facility in full….The Prepetition Secured Lenders will receive all remaining value from the North American Debtors (until repaid in full), except as otherwise set forth in the Settlement Agreement…The Settlement Agreement contemplates the following economic consideration to Holders of Administrative Claims who do not opt out of the Settlement Agreement (to be shared pro rata): a baseline recovery of $180 million, including $160 million (which amount is inclusive of, not in addition to, amounts funded into the Merchandise Reserve, as set forth in the North American DIP Order) and the first $20 million of proceeds from the liquidation of Toys Delaware assets after the Term DIP Facility is paid in full; incremental shared recovery with the Prepetition Secured Lenders if the aggregate recovery of the B-4 Lenders from Toys Delaware and Wayne (but not the Geoffrey Debtors) exceeds 50% of the approximately $1 billion in aggregate prepetition B4 Claims, as further set forth in the Settlement Agreement; and their applicable share of recoveries realized from certain non-released claims, which are assigned to the Non-Released Claims Trust….The Settlement Agreement contemplates a substantial contribution claim of an aggregate amount not to exceed $2 million for the benefit of the Ad Hoc Vendor Group and vendor members of the Creditors’ Committee (the ‘Vendor Committee Members’) to partially pay professional fees incurred in connection with negotiations relating to the Wind-Down and the Settlement Agreement.”
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