DEBTWIRE BROADCASTToys R Us pre-holiday filing backed by USD 3bn DIP

Debtwire journalists and analysts will discuss the challenges facing Toys R Us in its Chapter 11 restructuring. | 20 September 2017

AGENDA

Opening Remarks and First Day Hearing:Pat Holohan, Court Reporter

Background/History: Reshmi Basu, Associate Editor

Financial Analysis:Philip Emma, Senior Research Analyst

Legal Analysis:Joshua Friedman, Senior Legal Analyst

Q&A

2

OVERVIEW

Toys R Us filed for Chapter 11 on 18 September with no proposed restructuring plan in place

Toys R Us receives over USD 3.1bn of DIP financing Toys – Delaware and Toys Canada are borrowers under a USD 1.85bn DIP revolving credit facility and USD 450m DIP FILO term loan to finance North American debtors

B-4 lenders are providing a USD 450m DIP TL to Toys – Delaware, which is also a borrower under intercompany DIP facilities

True Taj noteholders provide USD 375m DIP to finance international entities

Rapid succession of maturities, substantial debt service obligations and underinvestment combined with shift away from brick-and-mortar stores impeded liquidity

3

THE COMPANY

4

In 2005, Toys R Us was taken private by Kohlberg Kravis Roberts, Bain Capital and Vornado Realty Trust in a USD 6.6bn buyout

Company is a toy and baby products retailer, generating 40% of its annual revenue in 4Q

Toys R Us has about 1,700 stores and 257 licensed stores in 38 countries, plus additional e-commerce sites

THE DESCENT

5

Significant debt burden

Competition from peers

Supply chain issues

FIRST DAY HEARING

6

“We are all Toys R Us kids”

Judge approves USD 3.1 billion DIPs on interim basis

Second day hearing set for 10 October

Tru Taj DIP objections overruled

Time to mend vendor relationships, prepare for the holidays

FINANCIAL ANALYSIS: SUMMARY

Timing is everything: Toys had issues, but it seemed like it had time to address capital structure.

Perfect storm – “bankruptcy” word uttered right at the point where company is heading into peak inventory inflows, peak vendor payables and peak of ABL need.

The immediate issue is that AP rises by more than 50% from 2Q end to 3Q peak. Did vendor contraction just accelerate an inevitability?

7

FINANCIAL ANALYSIS: SUMMARY (CONT’D)

Bigger problems: revenue declining from competition, margins contracting, expense cuts minimizing the drops, not eliminating it.

LTM revenue $11.3bn, adjusted EBITDA $709m. Against a year ago revenue down 3.9% but adjusted EBITDA down 12%.

Mix of problems: Toy business – Amazon effect, shift in how kids play. Baby business – babies still need diapers, but mail subscription is a better model. Fix needed to technology and strategy.

8

FINANCIAL INSIGHTS: PRE AND POST-PETITION CAPITAL STRUCTURE AND ESTIMATED RECOVERY VALUE

9

Issue isn’t just the level of debt and maturities, but where debt resides in cap structure

LTM Leverage:Toys-Delaware = 9.6xToys Europe/Tru Taj = 4.9xConsolidated = 7.4x

Consolidated Toys-Delaware TRU Taj LLC Corporate (Est.)

Net Sales 11,320 7,842 3,813 (335)

Gross Profit 4,045 2,645 1,651 (335)

Gross Profit Margin 35.7% 33.7% 43.3% 100.0%

Adjusted EBITDA 709 323 400 (14)

EBITDA Margin 6.3% 4.1% 10.5% -

SUMMARY OF TOYS R US CONSOLIDATING LTM RESULTS TO 2Q17 Forecasts – how reliable?40% of Revenue in 5 weeks post-Thanksgiving. December 2017? Let alone 2018..2019..2020…

Monthly Forecasts – no store closure impact.

LEGAL ANALYSIS: PRE-PETITION DEBT / DIP

Complex capital structure

USD 3.1bn in DIP financing

ABL/FILO: USD 2.3bn (USD 1.85bn revolver and USD 450m FILO TL)

TL: USD 450m

Taj: USD 375m of incremental notes

Pre-petition lenders/noteholders providing significant DIP loans

Ad hoc group of Taj noteholders + ad hoc group of B-4 lenders

B-2, B-3 lenders are not included

Refinancing pre-petition ABL/limited milestones

10

LEGAL ANALYSIS: CASE DYNAMICS

Different type of valuation fight?

Potential inter-creditor disputes

Taj noteholders vs. TL lenders

B-4 vs. B-2 & B-3

Taj DIP noteholders vs. Taj pre-petition noteholders

Unsecured creditor pushback?

UCC constituency

Closing stores / landlord issues

Going concern sale option?

Sponsors

11

DISCLAIMER

We have obtained the information provided in this report in good faith from publicly available data as well as Debtwire data andintelligence, which we consider to be reliable. This information is not intended to provide tax, legal or investment advice. You should seekindependent tax, legal and/or investment advice before acting on information obtained from this report. We shall not be liable for anymistakes, errors, inaccuracies or omissions in, or incompleteness of, any information contained in this report, and not for any delays inupdating the information.

We make no representations or warranties in regard to the contents of and materials provided on this report and exclude all representations,conditions, and warranties, express or implied arising by operation of law or otherwise, to the fullest extent permitted by law. We shall not beliable under any circumstances for any trading, investment, or other losses which may be incurred as a result of use of or reliance on informationprovided by this report. All such liability is excluded to the fullest extent permitted by law.

Any opinions expressed herein are statements of our judgment at the date of publication and are subject to change without notice.Reproduction without written permission is prohibited. For additional information call Debtwire Analytics at (212) 686-5374.

Copyright 2017 S&P Capital IQ (and its affiliates, as applicable). This may contain information obtained from third parties, including ratingsfrom credit ratings agencies such as Standard & Poor's. Reproduction and distribution of third party content in any form is prohibited exceptwith the prior written permission of the related third party. Third party content providers do not guarantee the accuracy, completeness,timeliness or availability of any information, including ratings, and are not responsible for any errors or omissions (negligent or otherwise),regardless of the cause, or for the results obtained from the use of such content. THIRD PARTY CONTENT PROVIDERS GIVE NO EXPRESS ORIMPLIED WARRANTIES, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSEOR USE. THIRD PARTY CONTENT PROVIDERS SHALL NOT BE LIABLE FOR ANY DIRECT, INDIRECT, INCIDENTAL, EXEMPLARY, COMPENSATORY,PUNITIVE, SPECIAL OR CONSEQUENTIAL DAMAGES, COSTS, EXPENSES, LEGAL FEES. OR LOSSES (INCLUDING LOST INCOME OR PROFITS ANDOPPORTUNITY COSTS OR LOSSES CAUSED BY NEGLIGENCE) IN CONNECTION WITH ANY USE OF THEIR CONTENT, INCLUDING RATINGS.Credit ratings are statements of opinions and are not statements of fact or recommendations to purchase, hold or sell securities. They do notaddress the suitability of securities or the suitability of securities for investment purposes, and should not be relied on as investment advice.

13