Fung Retailing’s battle with the administrators of bankrupt Toys R Us has ramped up, with the latter company filing an injunction request in US courts this week.

The Hong Kong company is working to protect its first-right-of-refusal clause on acquiring shares in the Toys R Us Asia business, beyond its existing 15 per cent cornerstone holding. That was a condition of its investment.

But Toys R Us, well aware that the toy retailer’s strongest and most valuable business unit is the Asian company, want to maximise the gain from its sale through an open auction process, in order to have as much cash as possible to pay creditors.

Various international media outlets have reported an 85 per cent stake in the Toys R Us Asia business could be worth more than US$1 billion and there have been unconfirmed reports Fung Retailing wants to purchase the entire business, most likely with a private equity partner.

Toys R Us’ application for an injunction seeks to block Fung Retailing’s attempts to open arbitration over the sale. Toys R Us claims Fung is trying to derail the reorganisation process and Bloomberg has previously reported the US company wants to void the first-right-of-refusal clause.

Bloomberg observed: “This uncertainty will drive down bids – benefiting Fung (which can then either exercise its right of first refusal … or bid for the asset at a depressed price), but harming the debtors and their creditors (whose primary basis for recoveries will be the value achieved from the Asia JV sale).”

Toys R Us Asia has more than 220 stores in Mainland China, Hong Kong, Singapore, Thailand, Malaysia, Brunei and Taiwan.