RealTime IT News

eToys Puts Vendors on Hold

What happens when you fire so many employees you don't have enough folks left to answer the phone? If you are struggling like eToys , you set up a recorded message to handle all those pesky calls from your creditors.

The online toy company, which is shutting down its European operation and laying off 700 of its 1,000 U.S.-based employees, says in the message (you can hear it at 310-998-6005) that due to the large number of creditors and its reduced work force, it "will not be able to answer phone calls on a timely basis." eToys, whose stock was trading in the 15 cents a share range today, says in the message that "seven of our largest creditors have agreed to serve on an informal creditor's committee," which will "likely hire a law firm to advise them."

The company said the informal creditors committee will serve as a channel of communications for creditors, including trade creditors, non-trade creditors and bond holders. Representatives have been named from Mattel, NBC and Pacific Asset Management, among others.

On Dec. 17, eToys announced weaker-than-expected results for the holiday season and, amid dwindling cash levels, said it will take "aggressive" measures to continue as a going concern, including the possible sale of the company. Goldman, Sachs was hired to explore options for the company, including a merger, asset sale, investment in the company or another comparable transaction or a financial restructuring. The massive downsizing came earlier this month.

The phone message goes on to say that "our objective remains to find the highest value strategic alternative for stakeholders, under Goldman, Sachs leadership," and adds that the creditors committee will act as a sounding board for proposals.

Further communication to creditors is expected to come from the committee, eToys said in its message.