Toys R Us Put Option
Toys R Us Receivable Put Option- AR Put- Credit Put – Bankruptcy Protection | Trade Risk Strategies
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Trade Risk Strategies assists companies all over the globe protect their accounts receivable from unexpected customer bankruptcy. We are experts with the issuance of bank issued and private hedge fund credit put options (also known as AR puts). We have structured many put options on popular names including Toys R Us. We provide consultations to our clients interested in Toys R Us put options and assist our clients with negotiating the most up to date rates. We originate and set up AR put contracts with our financial partners on behalf of our clients. We can have contracts executed the same day if necessary.
What is a Toys R Us Receivable Put Option?
When a supplier receives a purchase order from Toys R Us, or any retailer, credit lines and payment terms are established. The supplier invests money to manufacture or acquire the goods and absorbs the cost of salaries, overhead, and pays for shipping to deliver the goods to the client. This is done well before payment is made from the retailer. Often times suppliers will “self insure” the goods, meaning, they will ship the goods without any payment protection and take a loss should there be a default. Sometimes suppliers don’t realize that a credit put option can be purchased to hedge their risk, and other times suppliers chose to absorb the risk themselves. Suppliers who self insure is an indication that the retailer represents a small portion of the supplier’s overall business. For other companies whose relationship with the retailer represents a large portion of their business, particularly without a credit put option in place, a bankruptcy default by the retailer could be devastating.
A Toys R Us Receivable Put Option is a contract between the supplier and a third party “boutique” financial firm who will buy the claim from the supplier if Toys R Us were to file bankruptcy. A contract is established at the prevailing rate depending on risk and market volatility. Fees are paid based on the rate and length of the term. If a bankruptcy event were to occur during the term of the contract period, the supplier would be paid 100% of the contract value (exposed open receivables) at a predetermined time after the bankruptcy court has confirmed the supplier is a named creditor on the bankruptcy petition.
A Toys R Us Receivable Put Option can be an effective way for a company to leverage the financial capacity of a third party while protecting the safety of their bottom line. In the absence of credit insurance – which is not available to cover retailers that credit insurers deem high risk – AR puts can mean the difference between a supplier taking an irreversible hit to their cash flow or remaining solvent if a bankruptcy event took place.
What types of firms offer Toys R Us Receivable Put Options?
AR puts are offered by only a few financial firms. The market is limited for this type of contract since it is considered highly specialized and speculative. Trade Risk Strategies has originated many Toys R Us Receivable Put Option. TRS is well known in the industry and respected by our financial partners. We know the market very well and can place a Toys R Us AR put option with the most appropriate firm.
Benefits to Receivables Put Options
- It is not necessary to cover entire accounts receivable turnover. Single name coverage is what receivables put options was designed for.
- With most put options there is no deductible or coinsurance required
- Straightforward put option contract between two parties.
- Claims paid quickly once supplier is listed as a creditor on bankruptcy petition
Credit Put Option Considerations
- Rates that are not locked in are subject to change based on financial news and market availability
- Credit put options are available to cover a limited number of publicly traded entities
- With few exceptions, most put option fees are due upfront at contract execution
What is the cost of an AR Put?
Rates are based on coverage amount multiplied by monthly rate multiplied by the number of months needed
How long does it take for credit put option to be in place?
- Depending on the financial entity selected, credit put options can be secured the same day or can take as long as 3o days
- Coverage is bound once the put option contract is executed and fees paid so timeline also depends on the timeliness of the client
* Note: This is information is not an indication of Toys R Us’ financial strength or lack thereof. The decision to secure a credit put option on Toys R Us or any risk is solely up to the client.
Let Trade Risk Strategies help you protect your business. Fill out the form to the right or call us at 1-844-315-4985 for a custom, one-on-one consultation.
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