KB Toys Gets Green Light on Liquidation

Pittsfield, Mass. Following the approval of a Delaware bankruptcy judge on Thursday, KB Toys commenced its going-out-of-business sale chain-wide on Friday. Judge Kevin Carey granted the request after attorneys ensured that KB Toys resolved issues with landlords and creditors concerning rent and other legal operating issues.

"I can see no other alternative," Carey said. "We're at a time of year where, unless the going-out-of-business sales go forward now, there's hardly any sense in doing it."

With the judge’s approval, KB Toys will pay store-closing bonuses of up to $1,500 to store managers and assistant managers to ensure that the sales proceed smoothly. Without the bonuses, KB would be subject to a "mass exodus" of critical employees, which would have negatively affected store operations even further.

The liquidation sale is expected to run through Feb. 9.

KB Toys filed for Chapter 11 bankruptcy protection on Dec. 11. The filing allows the company to retain more control of its assets during the liquidation sales than it would have under a typical Chapter 7 liquidation, which requires companies to give up their assets and property.

KB Toys, which emerged from an initial bankruptcy filing in 2005 as a subsidiary of investment firm Prentice Capital Management, has about $480 million in annual sales. The chain operates 277 mall-based stores, 114 outlet stores, 40 KB Toy Works stores and 30 temporary holiday stores. The chain also employs approximately 10,800 employees. More than half of these associates are temporary seasonal workers.

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