Not All Fun and Games: Toys R Us Drowning Under Legal Bills

May 27, 2019

2 min read

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What's going on here?

With online sales ceasing in February 2018 and the last stores closing in April 2018, Toys R Us is still not yet out of the woods. Last year, administrators were appointed, and recent reports suggest that large legal bills still remain outstanding.

What does this mean?

In spite of having ceased trading well over a year ago, Toys R Us is facing huge unpaid legal fees. With costs to date set at £900,000 and future predictions said to amount to £870,000 the final estimate is of a figure in the region of £2,000,000.

As of February 2019, DLA Piper had been paid £16,000 and is owed another £96,000, while Kirkland & Ellis has been paid more than £450,000 and is owed a further £37,000. Stephenson Harwood has collected £360,000 and stands to receive another £18,000. Travers Smith and Troutman Sanders are due £7,000 and £14,000 respectively.

What's the big picture effect?

Also known as ‘administrative consolidation’, ‘joint administration’ refers to the management of multiple bankruptcy estates at once to maximise administrative efficiency and decrease expenses. But in spite of these safeguards, it remains a very costly process. A recent progress report by the appointed administrators for Toys R Us highlights the fact that legal costs are to rise to a little under £2 million.

The collapse of Toys R Us represents the demise of the high street retail market. This trend is generating a lot of work for large legal firms. Across other casualties including BHS, House of Fraser, Maplin and Poundworld, law firms have been able to rake up over £7 million in legal fees last year for dealing with these administrations.

SHB Realisations, better known as BHS (the store chain formerly owned by Sir Philip Green which went into administration in 2016) has realised the largest sums. A liquidators’ statement of receipts and payments revealed that their legal bills from 2017 to 2018 sits in excess of £5 million.

With a huge number of law firms being involved in these complex winding-down processes (no less than seven are reported to be involved with the joint administration of Toys R Us), the demise of the high street retailers is providing a rich source of revenue for the large law firms in the UK.

It seems likely that this will continue for a good while yet as many retail companies struggle to adjust to the modern marketplace.

Report written by Mark P

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