Toys R Us could plunge into administration tomorrow after talks broke down with potential buyers.
The toy chain’s UK arm – which employs 3,000 people at 105 stores – is desperately scrambling to find the cash for a £15million VAT bill due to the taxman on Tuesday.
But after last-ditch discussions with potential buyers broke down last week, a rescue looks increasingly unlikely and bosses are thought to be braced for collapse.
Recovery firm Moorfields is understood to be on standby to handle the administration process.
And the Pension Protection Fund lifeboat (PPF) has been warned that the retailer’s 600-member retirement scheme is likely to fall into their hands, meaning substantial cuts to savers’ benefits.
Insiders believe the situation is bleak after potential buyers Hilco Capital, known for saving music chain HMV in 2013, and Alteri Investors pulled out of talks due to the complexity of the turnaround job needed.
The toy chain’s UK arm – which employs 3,000 people at 105 stores – is desperately scrambling to find the cash for a £15million VAT bill due to the taxman on Tuesday
It comes just two months after the stricken toy retailer won a stay of execution thanks to a restructuring deal which saw it pledge to shut a quarter of its shops and slash its rent bill.
Toys R Us also said it would pump an extra £9.8million into the company pension scheme in a battle to close a funding black hole.
But Christmas trading is thought to have been weak and the deal did not do enough to stabilise the firm.
Although Tuesday’s VAT bill is likely to be the trigger that causes collapse, the disaster has been years in the making thanks to the rise of internet retailers.
US giants such as Amazon now rule a market once dominated by bricks and mortar businesses, squeezing them out of the High Street as customers stay at home and buy online instead.
The sea change in shopping habits has already forced shop closures at companies from Homebase to Marks & Spencer.
Toys R Us’s US business filed for bankruptcy protection last year and is drastically scaling back its operation, with plans to axe another 200 stores unveiled last week.
Frantic efforts are reportedly continuing to find a buyer for the company’s operation on the Continent, which has more than 230 shops in ten markets including France, Germany and Spain.
Potential buyers are said to have been told they must lodge a bid by the end of today.
Toys R Us declined to comment.