By Tracy Rucinski

NEW YORK, Oct 24 (Reuters) – Vendors to Toys ‘R’ Us have
resumed shipping top products, a bankruptcy lawyer said on
Tuesday, allowing the retailer to stock its shelves ahead of the
all-important holiday season.

“Inventory is on the shelves,” Joshua Sussberg, an attorney
with the company’s law firm, Kirkland & Ellis, said at a U.S.
Bankruptcy Court hearing in Richmond, Virginia, adding that the
company was well-stocked with the “latest and greatest” in toys.

Toys ‘R’ Us generates roughly 40 percent of total revenues
in the fourth quarter, and industry experts have expressed
concern over the big-box retailer’s ability to retain vendors
and customers after its Chapter 11 bankruptcy filing on Sept.
19.

At the time of the filing, nearly 40 percent of its trade
base had stopped shipments. Now, 100 percent of merchandise
vendors that supply the top 20 products are actively shipping,
followed by 49 of the top 50 vendors and 91 of the top 100,
Sussberg said.

However, Toys ‘R’ Us still owes creditors $5 billion, and at
least two major toymakers, Hasbro Inc and Jakks Pacific,
have warned that the bankruptcy would hurt their business this
year.

Some smaller toymakers have decided to stop shipments.

Wayne, New Jersey-based Toys ‘R’ Us, which also owns the
Babies ‘R’ Us chain, is among dozens of traditional
brick-and-mortar retailers that have struggled under high debt
as more consumers shop online.

Toys ‘R’ Us is saddled with debt from a $6.6-billion buyout
in 2005 by KKR & Co LP, Bain Capital LP and real estate
investment trust Vornado Realty Trust.

As part of its plan to restructure and entice customers, it
wants to add event space, hands-on product demonstrations and
combine its flagship and Babies ‘R’ Us stores.

Some investors were skeptical over the outlook for big-box
retailers.

“The opportunity for Toys is difficult given the amount of
leverage it had when it entered bankruptcy, as well as its
current operating trends,” said George Schultze, distressed
specialist and head of Schultze Asset Management. “The outlook
in retail is terrible, even for big companies like Toys, so
there isn’t a lot of new capital available for that industry.”

Meanwhile, the unsecured creditors committee, which includes
Mattel Inc, LEGO Systems and Simon Property Group Inc
, plans to investigate financial transactions made before
the Chapter 11 filing, lawyer Kenneth Eckstein said on Tuesday.
(Reporting by Tracy Rucinski; Editing by David Gregorio)