US toy retailer Toys 'R' Us has filed for bankruptcy protection in the US and in Canada in a bid to restructure its debts.

The company, the largest toy retailer in the US, employs approximately 64,000 staff across 1,600 stores and its Chapter 11 filing is among the largest ever submitted by a specialty retailer.

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A number of lenders, including a JPMorgan-led bank syndicate, have already committed $3bn in debtor-in-possession financing, with the aim of helping the 69-year-old company tackle its exorbitant debts.

The chain is saddled with debts following a $6.6bn buyout in 2005 led by KKR & Co and Bain Capital LP, together with real estate investment trust Vornado Realty Trust. The company also has bonds coming due in 2018, which according to industry data have lost 50% of their value in September alone.

"We expect that the financial constraints that have held us back will be addressed in a lasting and effective way," said chief executive Dave Brandon.

"Together with our investors, our objective is to work with our debtholders and other creditors to restructure the $5 billion of long-term debt on our balance sheet, which will provide us with greater financial flexibility to invest in our business."

The financing, which remains subject to court approval, is also aimed at reassuring the company's suppliers that they will get paid for the items they have already delivered and are scheduled to deliver ahead of the busy Christmas period.

The decision to file for bankruptcy, which comes just ahead of the holiday season, highlights the ongoing struggle the company has faced in keeping up with larger rivals of the calibre of Amazon, Walmart and Target.

According to GlobalDataRetail estimates, in 2016 13.7% of all toy sales were made online, a sharp increase from the 6.5% percentage recorded five years ago.

"The past decade has seen a dramatic change in the domestic toy market with new channels, increased competition, and new technology all having a deleterious impact on the sector and traditional toy stores," said GlobalData Retail managing director Neil Saunders.

"Unfortunately, Toys 'R' Us has not responded effectively to these challenges."

The New Jersey-based company added its Canadian unit intends to seek protection in parallel proceedings under the Companies' Creditors Arrangement Act (CCAA) in the Ontario Superior Court of Justice.

Meanwhile, operations outside North America, which include 255 licensed stores and joint venture partnerships in Asia are not part of the bankrupt proceedings and remain profitable, the company said in a statement.