Toy makers demand compensation

Hong Kong - Toy makers affected by the closure of US retailer KB Toys are seeking compensation from Hong Kong sourcing giant Li & Fung.

KB Toys went bankrupt in December 2008 following declining sales figures, affecting approximately 100 manufacturers and over 100,000 employees in Hong Kong. The affected companies have banned together to form the Joint Committee for Li & Fung Creditors and said Li & Fung, which acted as an agent for KB Toys, had both business and moral obligations to make the payments.

A spokesperson for the group added that it was considering legal action against KB Toys and Li & Fung.

In a press release, Li & Fung said it was acting as a buying agent for KB Toys and was in discussion with KB Toys suppliers to provide assistance in bankruptcy proceedings.

"As one of the largest creditors of KB Toys, Li & Fung will seek proper recourse from the bankruptcy courts and has approached most of the affected factories to met with the group to discuss how it can help them to deal with the bankruptcy proceedings in the US," said executive director of Li & Fung Henry Chan.

The company said as one of the largest creditors of KB Toys, Li & Fung suffers an exposure of approximately US$5 million, representing mainly unpaid commissions.