eWEEK content and product recommendations are editorially independent. We may make money when you click on links to our partners. Learn More.
EToys and its subsidiaries, BabyCenter.Com and ParentCenter.com, could be forced into bankruptcy after an agreement with creditors expires this week.
The Santa Monica, Calif., toy sellers unsecured creditors have agreed not to take action to collect on their debts, and eToys has agreed not to pay any past-due debts and to operate under a budget designed to maintain its current operations through Thursday.
The creditors group, which includes such names as toy makers Hasbro, Lego Group and Mattel, had set a Jan. 31 deadline but extended that until Feb. 15.
EToys, which announced it will officially close down April 6, owes creditors about $200 million, nearly half of which is owed to members of the informal creditors group, including R.R. Donnelly & Sons, Fir Tree Partners, Pacific Asset Management and Staffmark, according to public documents.
EToys is trying to get its creditors to accept an out-of-court agreement, said Jonathan Cutler, the companys spokesman. It also continues to work with The Goldman Sachs Group as its financial adviser to explore a merger, asset sale or financial restructuring.
Creditors are nervous. Michael Fox, an attorney representing Hasbro, Lego and Mattel, is meeting with eToys today to try and work something out.
EToys owes Brio, a specialty toy maker in Germantown, Wis., about $200,000, but the company isnt worried because the debt is insured, said Brio President Peter Reynolds.
“We dont extend any credit to e-commerce companies beyond our insurance coverage, Reynolds said.
RemedyTemp, a national temporary-staffing firm, wasnt as lucky. It expects to take a charge of about $2 million because of unpaid invoices from eToys. The bills come from providing staffing at the online retailers customer service and distribution center for the month of December, said Alan M. Purdy, RemedyTemps chief financial officer.
To continue operations, eToys would need a substantial capital infusion, and it doesnt believe that it will get any more money. Its an ignominious end for an electronic retailer that once had a market cap of $1.5 billion, larger than that of Toys R Us.