The company and its restructuring advisers are considering filing for Chapter 11 protection in the US Bankruptcy Court in Richmond, Virginia, according to the WSJ report.
The privately-held toy retailer had previously said it was working with investment bank Lazard to help address its approximately $5 billion in debt, of which roughly $400 million comes due next year.
The potential Chapter 11 filing could be a result of the company’s suppliers tightening trade terms, including holding back on shipments unless the toy retailer is able to make cash payments on delivery, the newspaper reported.
Toys ‘R’ Us declined to comment on the report.
The move by Toys ‘R’ Us to potentially file for bankruptcy comes at a time when more and more consumers increasingly make purchases from online retailers like Amazon and avoid visiting brick-and-mortar shops.
There have been more than a dozen significant retail bankruptcies this year, but none for retailers as big as Toys ‘R’ Us, which has more than 1,600 stores worldwide.
Toys ‘R’ Us tapped restructuring attorneys from Kirkland & Ellis, CNBC reported this month.
The company has been saddled with debt since buyout firms KKR & Co. and Bain Capital, together with real estate investment trust Vornado Realty Trust, took Toys ‘R’ Us private for $6.6 billion in 2005.