Bankrupt Toys R Us' plan to pay executives multimillion-dollar bonuses 'defies logic and sense,' trustee says

AP/Bebeto Matthews

Toys R Us' bankruptcy isn't going smoothly.

• The Department of Justice trustee assigned to Toys R Us' bankruptcy case has written a fiercely worded letter criticizing the retailer's plan to pay executives multimillion-dollar sums.
• In a statement, Toys R Us defended the motion as "standard practice."
• A final decision will be made in court in December.

Toys R Us' bankruptcy proceedings are off to a rocky start.

In a fiercely worded letter, Judy A. Robbins, the Department of Justice trustee assigned to Toys R Us' bankruptcy case, argued that the retailer's plan to pay multimillion-dollar bonuses to executives "defies logic and sense," as reported by The Record.

The letter was written in response to a motion, filed by Toys R Us in bankruptcy court on November 15, that requested permission to award bonuses to 17 executives. The bonuses would start at $16 million and later double should certain financial goals be met at the company.

"Apparently, this Christmas, Toys R Us intends to deliver not only 'children their biggest smiles of the year' but the insiders, too," Robbins wrote, making reference to an earlier bankruptcy filing by Toys R Us CEO Dave Brandon, who included the retailer's jingle to evoke nostalgia.

She noted that five executives were given a package of bonuses totaling $8.2 million just before the bankruptcy filing. This included a $2.8 million incentive for Brandon "just to stay with the company," Robbins wrote.

Robbins also questioned how all the company's financials would pan out, given that Toys R Us has not yet submitted a restructuring plan.

Toys R Us filed for bankruptcy restructuring earlier this year, after being crushed by a mountain of debt resulting from a leveraged buyout. In a statement to Business Insider, it defended its motions regarding the incentives and bonuses, saying it is "standard practice for a company involved in a restructuring."

"Toys R Us filed several motions with the court including a proposal for an incentive program which includes all team members, not just senior executives," the statement read.

The company did file a separate motion with the court, hoping to pay $45.8 million to 3,805 employees in management roles. If financial goals are met, the company would actually pay out $68 million to these managers.

"Before an incentive program can be implemented, we will continue consulting with our creditors and the US trustee regarding the program and the program must be reviewed and approved by the Federal Bankruptcy Court," the statements continued

DOJ trustees are assigned to bankruptcy cases to ensure all laws are followed, and to make sure all sides - including creditors and debtors - are represented and play fairly. The trustees do not have the power to make prosecutorial decisions or to rule on motions.

A judge will rule on Toys R Us' motion next month.