Toys R Us 'faces administration this month unless it finds investors for £15m tax bill'

Retailer reportedly racing to secure rescue deal before looming VAT payment deadline

A south London branch of Toys R Us, one of dozens the retailer is closing across the UK (Getty)

The British arm of Toys R Us could reportedly fall into administration within a fortnight unless it finds investors willing to foot a £15m tax bill.

The retailer is racing to secure a rescue deal before a 27 February deadline for a huge VAT payment, Sky News reported.

It comes after the troubled firm was rescued from the brink of collapse by a last-minute deal with its creditors four days before Christmas.

The broadcaster said three possible buyers had an expressed an interest in acquiring parts of the company, which employs about 3,200 people across 105 stores in the UK.

The Entertainer, a privately owned toy shop chain, and Alteri Investors, a private equity firm specialising in turning around troubled companies, are said to have held talks with Toys R Us advisers this month.

Hilco Capital, which rescued music and entertainment retailer HMV in 2013, is understood to have tabled a proposal to take on only a minority of the Toys R Us outlets.

Toys R Us declined to comment on the VAT bill.

The company has been battling tough market conditions and declining sales for some time. While its smaller shops and online store have held up, the bigger, warehouse-style outlets have suffered, in part because of the emergence of online behemoths like Amazon.

As part of December's rescue deal, 26 loss-making branches are to close and up to 800 people will be made redundant.

Toys R Us also agreed to pay a total of £9.8m into its pension fund over the next two years.

The Pension Protection Fund had said it would vote against the deal unless Toys R Us upped its offer to pay into the scheme, which is more than £25m in deficit.

The US arm of Toys R Us is to shut about 180 stores, about a fifth of the business, after filing for bankruptcy protection in September. The US arm lost $623m (£466m) in the three months to the end of October.