Toys R Us submits plan to close or sell all US stores

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It is a blow to the toy industry, which has relied on the retailer for supplying row after row of toys and premium pricing, and who now must look to big box stores and Amazon.

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It is a black-eye for its its three owners, KKR, Bain Capital Partners and real estate investment trust Vornado Realty Trust, who took the retailer private in 2005 for $6.6 billion, leaving it with $4.9 billion in debt. That debt would become an anathema for the business, keeping it from making the investments it needed as the retail landscape rapidly transformed around it.

The debt, of course, was what ultimately did the company in. Under its onerous weight and with little hope of refinancing it, Toys R Us hired restructuring advisers in 2017. The plan was to put together pre-packaged bankruptcy for after the holiday season in advance of upcoming payments due, sources tell CNBC.

But when CNBC broke news that it may file, it caused a run on the bank. Vendors froze their shipments to Toys R Us, only accepting cash on delivery. In weeks, it was forced to file for bankruptcy before its crucial holiday season and without a plan to emerge. A miserable holiday season would be the nail in its coffin.

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Years of being the most important toy store in town left it cavalier, according to those former employees and industry insiders. They said it didn't take care of its store base -- whether that meant pruning stores that weren't making money, or putting resources toward those that were. It also under-invested in its digital business even as e-commerce skyrocketed, those sources told CNBC.