Operationally, they are still quite profitable; they just can’t make enough money to pay the debt they are loaded up with. In the event of bankruptcy, the debt holders would take over the company, and either run it or sell it to someone.
Didn’t Toys’R Us have a downtown Manhattan store that was just a money hole? While the 110,000 sft store and play room attracted tourists, the sales did not make a dent to the pricey Times Square rent. They closed it last year but having it run for so many years did not help the bottom lime at all.