PITTSFIELD, Mass. KB Toys Inc. said Friday it expects to emerge from Chapter 11 bankruptcy protection by month's end under new ownership and with two former Toys R Us presidents on its new management team.
The announcement came after a bankruptcy judge in Delaware on Thursday approved the privately held toy retailer's plan to reorganize debts and resume operating outside bankruptcy protection.
Pittsfield-based KB Toys said it expects to emerge from Chapter 11 around Aug. 29, a year and eight months after it entered bankruptcy protection amid aggressive price wars with discount chains.
The reorganization puts the more than 80-year-old chain under the control of a subsidiary of New York City investment firm Prentice Capital Management, and replaces the company's chief executive, Michael L. Glazer.
Taking over as CEO and president will be Gregory R. Staley, a former president of Wayne, N.J.-based Toys R Us' U.S. and international divisions. Roger V. Goddu, a former CEO at Montgomery Ward and also a former president of Toys R Us USA, will serve as a director and consultant at KB Toys.
"KB is now well-positioned to return to success," Glazer said in a statement.
The approval of KB's reorganization plan came three months after the chain said it expected to emerge from Chapter 11 in time for the holiday shopping season without having to close additional stores or cut more jobs.
However, KB has said there is no guarantee its new ownership might not eventually decide to eliminate some of the chain's more than 600 remaining stores or more than 7,000 employees. Both numbers are about half what KB had when it entered bankruptcy protection.
During bankruptcy, KB sold its retail Internet operation to eToys Direct Inc. and also closed a distribution center.
An affiliate of Prentice Capital Management will invest $20 million in the reorganized company, and extend credit of up to $25 million in exchange for 90 percent of the new entity's private equity common stock and 100 percent of its preferred stock, a type of stock that grants holders preference over common stock holders in case assets must be liquidated.
The remaining common stock is to be held in trust for the benefit of KB Toys' unsecured creditors.