Well, we certainly didn’t see this coming.

The New York Post reports that Toys R Us, which has long been America’s biggest retailer for all manner of toys and games and nowadays is one of the only major names in that field to retain the brick-and-mortar side of the business, has enlisted the aid of the Kirkland & Ellis law firm to consider options for addressing current financial trouble.

One of those options, according to the Post’s unnamed source, is refinancing…but another is far more grave: filing for bankruptcy.

The company, which is privately held, is reportedly taking these drastic measures because it faces a debt of around $5 billion…and around $400 million of that sum has to be paid next year.

More than a dozen retailers including children’s clothier The Gymboree Corporation and teen apparel seller Rue21 Inc have filed for bankruptcy this year as consumers shift their spending habits to e-commerce competitors.

Toys“R”Us refinanced some of its debt last year, giving it a few more years to turn its business around before facing billions in debt repayments. In addition to e-commerce, Toys“R”Us has seen steep competition from discounters Wal-Mart and Target.

A large portion of Toys“R”Us’s debt is secured by real estate, which could help the company’s refinancing prospects, according to Fitch. The ratings agency said that real estate valuations have largely remained the same or improved since Toy“R”Us’s properties were appraised but cautioned that retail’s recent financial weakness could hurt those figures.

Kirkland & Ellis is not commenting on the story, but Toys R Us has promised an update on its financial situation is coming on September 26. “Toys’R’Us is evaluating a range of alternatives to address our 2018 debt maturities, which may include the possibility of obtaining additional financing,” the company said in a statement.

USA Today quotes some analysis of what all this means:

“If they cannot reach sensible agreements with lenders or find ways of restructuring their debt, it is a very distinct possibility,” [GlobalData managing director Neil Saunders] said. “It would also be helpful in giving Toys R Us some flexibility to exit leases and stores that they no longer want.”

But such a move could be crippling heading into the all-important holiday season, a period when many retailers earn roughly half of their annual revenue, and the time of year that should be most lucrative for the iconic toy seller.

“Bankruptcy at this moment in time would be damaging,” Saunders says. “It would make consumers nervous about buying bigger ticket items from the chain as the lucrative holiday period approaches” […]

Toys “R” Us has dealt with a heavy debt load since it became a private company in 2005. Its private equity investors, KKR, Bain Capital, and Vornado Realty Trust, initially planned to recoup their investment with a public stock offering within three years, but that plan fell through when the Great Recession hit.

The owners brought in a new chief executive, Dave Brandon, in 2015 to helm a turnaround that could set the company up for either another attempt to go public, or a sale. But the retailer has continued to struggle. Walmart is now the nation’s largest toy seller, and shoppers can also pick up toys by browsing online giant Amazon, or seeking out other mass merchants.

While there are always variables unique to every company, it sounds like a trend that has afflicted lots of specialty retailers has finally caught up to Toys R Us. Just like books, video games, and lots of other products, any store that provides a finite selection of toys faces stiff competition when people can search for and acquire the specific item they want on the internet.

With Christmas coming up, do you hope Toys R Us recovers, or have you already made the switch to Amazon? Share your thoughts below!