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Toymakers Say There Is 'Widespread Panic' Following Toys "R" Us Bankruptcy

Within hours of Toys "R" Us's bankruptcy filing last month, the maker of Max Tow Truck and Animal Babies Nursery sounded a financial alarm of its own: Jakks Pacific, the company said, expected to swing to a loss this year as a result of the mega-retailer's bankruptcy.

Toymakers Say There Is 'Widespread Panic' Following Toys "R" Us Bankruptcy

Toys "R" Us owes $14.06m to Jakks, which last year posted a profit of $1.2m, making the California-based toy supplier one of more than 100,000 creditors sideswiped by the toy chain's bankruptcy in the run-up to the all-important holiday season. In total, Toys "R" Us owes $7.5bn to a group that includes virtually every major toymaker in the country: Mattel (owed $136m), Hasbro ($59m), Spin Master ($33m), Lego ($32m), Radio Flyer ($12m), Crayola ($2.6m).

As toymakers and suppliers decide what to do next, many say they are likely to lose millions of dollars as a result of the bankruptcy, sending a ripple of financial troubles throughout the toy industry.

This year “continues to present a challenging retail environment, which has now been further disrupted by the Toys "R" Us Chapter 11 filing,” Stephen Berman, chief executive of Jakks, said in a statement. “For the past 22 years, Toys "R" Us has been one of Jakks’ most significant business partners.”

A spokesman for Lego, which has been weathering its own financial troubles, said the company is “deeply engaged in ongoing dialogue” with Toys "R" Us. Others said they were consulting bankruptcy lawyers and financial advisers to sort out shipments — and payments — related to holiday inventory. VTech, the maker of electronic toys and tablets, says it expects holiday sales to Toys "R" Us “to decline.” Meanwhile, a handful of smaller companies say they have already severed ties with the world’s largest toy store chain.

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