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.