Toys 'R' Us, the largest US toy store chain, last night filed for bankruptcy protection.
The move is the latest sign of turmoil in the retail industry that is caught in a viselike grip of online shopping and discount chains.
The Chapter 11 filing is among the largest ever by a specialty retailer and casts doubt over the future of its about 1,600 stores and 64,000 employees.
It comes just as Toys 'R' Us is gearing up for the Christmas shopping season, which accounts for the bulk of its sales.
Analyst said that while the decision does not necessarily mean it is game over for Toys 'R' Us, it brings to a close a turbulent chapter in the iconic company's history.
Toys 'R' Us received a commitment for over $3 billion in financing from lenders including a JPMorgan-led bank syndicate and certain existing lenders, the company - which which also operates the Babies 'R' Us chain - said.
The financing, subject to court approval, reassures its suppliers they will get paid for their Lego building blocks and Barbie dolls that are being shipped for the holiday season.
"We expect that the financial constraints that have held us back will be addressed in a lasting and effective way," the company's chief executive Dave Brandon said.
"Together with our investors, our objective is to work with our debtholders and other creditors to restructure the $5 billion of long-term debt on our balance sheet."
Its Canadian unit intends to seek protection in parallel proceedings under the Companies' Creditors Arrangement Act (CCAA) in the Ontario Superior Court of Justice, Toys 'R' Us said in a statement.
Operations outside of the US and Canada, including about 255 licensed stores and joint venture partnerships in Asia, which are separate entities, are not part of the bankruptcy proceedings, Toys 'R' Us said.
The company's Toys 'R' Us and Babies 'R' Us stores and e-commerce sites around the world are open for business, it said.
The company is saddled with debt from a $6.6 billion buyout in 2005 led by KKR & Co and Bain Capital, together with real estate investment trust Vornado Realty Trust.
Toys 'R' Us has bonds coming due next year that have lost half their value this month, according to Thomson Reuters data, as investors have grown concerned about a possible bankruptcy.
The company opened a temporary store in New York City's Times Square this year to capture more Christmas shoppers, almost two years after it closed its flagship store barely a block away, driven out by high rents.
With assets of $6.9 billion based on its most recent annual report, it is the second-largest retail bankruptcy, trailing the filing in 2002 by Kmart, which had $14.6 billion in assets, according to research firm Bankruptcydata.com.
More than a dozen significant US retail chains have filed for bankruptcy this year.
Among them were Perfumania, clothing chains rue21 Inc and Gymboree, discount shoe chain Payless Holdings and designer clothing chain BCBG Max Azria Global Holdings.
Major US retailers including Macy's and Sears Holding have closed hundreds of locations as they struggle to compete discounters such as Wal-Mart Stores and Amazon.com.
Amazon's recent acquisition of high-end grocer Whole Foods Markets stirred speculation that the online giant will use its pricing power and huge reach among US consumers to go after market share of traditional brick-and-mortar grocers.
Toys 'R' Us is the second-largest toy seller in the US behind Amazon, according to consulting firm Kloster Trading Corp.
