NEW YORK (The Deal) -- For retailer Toys "R" Us the year 2014 could be the most critical in its history.
That's because the Wayne, N.J. based toy seller is in the midst of the longest time period passing without a meaningful debt maturity, according to Moody's Investors Service Inc.'s analyst Charles O'Shea.
But the company only has only so much time before it runs up against its debt maturities and it will need to improve operations, as well as show a quarterly sequential uptick in revenue and profits when it comes to refinance, the analyst said.
The toy retailer's next meaningful debt maturities of slightly under $1 billion come due in Sept. 2016, however, they become a liquidity concern in early 2015, O'Shea said in an April 16 report.
Though the company has the liquidity to survive in the short-term, it just had the worst fourth quarter in its history, O'Shea added. That dragged down its entire fiscal year's performance.
For the year ended Feb. 1, Toys 'R' Us generated about $12.5 billion in net sales, compared to about $13.5 billion for the same period a year prior, while the company had a net loss of about $1 billion from net earnings of nearly $40 million for the same period a year earlier, the company said in its earnings statement released Monday. Ebitda dropped for the fiscal year to $35 million from about $960 million the year prior, while adjusted Ebitda was nearly $600 million, down from about $1 billion.
After the holiday season, Toys "R" Us' debt to Ebitda ratio returned to over 8 times, or back to where it was following its leveraged buyout in 2005 by Kohlberg Kravis Roberts & Co. LP, Bain Capital LLC and Vornado Realty Trust, according O'Shea's report.