Dive Brief:
- In a prepackaged plan, KidKraft and its U.S. and Canadian affiliates has filed for Chapter 11 bankruptcy in the United States Bankruptcy Court for the Northern District of Texas, the toy company announced Friday.
- The plan includes the sale of all U.S. and Canadian assets to Backyard Products with a target close date in about two months, subject to approval by the court. Gordon Brothers affiliate 1903 Partners has agreed to give $10.5 million of new debtor-in-possession financing, subject to court approval, per the press release.
- The company will also begin proceedings with the Canadian Bankruptcy Court. Its operations in Europe, the Pacific and Asia won’t be part of the restructuring process, the release said.
Dive Insight:
After over 50 years in business, KidKraft filed for bankruptcy with the support of its first lien secured lender, its majority shareholder and Backyard. The terms of the company’s sale will facilitate the continued operation of the business as a going concern under new ownership.
The toy company aims to continue manufacturing and distributing products. The company has also filed customary motions that, if approved, would allow it to continue paying employee wages, benefits and customer programs.
“Today’s announcement marks an important step forward for KidKraft that will position us to continue investing in our industry-leading products and delivering for our valued customers well into the future,” Geoffrey Walker, president and CEO of KidKraft, said in a statement. “We are confident that with the strong support of new ownership, KidKraft will be on track to continue inspiring imaginative play experiences through our impressive range of high-quality products.”
Meanwhile, other toy brands and retailers have encountered a dip in sales. In Mattel’s Q1, the company reported a 1% decline in net sales, along with a net loss of $28 million and an operating loss of $36 million. Hasbro Inc. saw first quarter revenue drop 24% year over year to $757.3 million, while operating profit was up more than 500% to $116.2 million and the company swung to a net earnings of $59 million for the quarter, following a year over year net loss of $22 million. The toy industry’s sales dropped 8% in 2023 compared to the previous year, a January Circana report found.
A number of retailers and brands in other categories have recently been filing for bankruptcy. While Rue21, Express and Sam Ash have filed for Chapter 11, Pirch recently filed for Chapter 7, and Ted Baker operators in the U.S. and Canada filed for Chapter 15 bankruptcy.
