Lionel Corporation - History - Bankruptcy and Buyout

Bankruptcy and Buyout

After the sale of its train product lines, Lionel Corporation became a holding company that specialized in toy stores. By the early 1980s, Lionel operated some 150 stores, under the names Toy City, Lionel Kiddie City, Lionel Play Town, Lionel Playworld, Lionel Toy Warehouse, and Lionel Toy Town. For a time it was the second-largest toy store chain in the United States. Lionel ran into financial trouble during the early 1980s recession and filed for Chapter 11 bankruptcy in February 1982. After reducing to 55 stores, it emerged from bankruptcy in September 1985.

By 1991, the chain had regrown to 100 stores and was the fourth-largest toy retailer in the country, but it once again ran into trouble due to a combination of factors. In 1989, Robert I. Toussie L.P., a partnership of several retail executives, attempted to buy the company. Lionel resisted and the fight drained the company of cash. Meanwhile, non-specialty discount stores expanded their toy sections and undercut the prices of specialty toy chains. Additionally, Lionel found it difficult to compete on price with the larger Toys R Us, and it attempted to expand too rapidly in a weakened economy. After a string of unprofitable quarters, it filed for Chapter 11 bankruptcy on June 14, 1991. In 1992, Lionel again tried to reverse its fortunes by merging with the bankrupt Child World, the United States' #3 toy retailer, but was unable to secure financing. By February 1993, Lionel had closed all but 29 stores in six states, concentrating on the markets of Philadelphia, central New Jersey, Baltimore, Washington, D.C., Cleveland, and south Florida. Unable to reach an agreement for reorganization with its creditors, on June 2, 1993, Lionel announced its intention to liquidate all of its stores and go out of business.

The Lionel trademarks were purchased by Richard Kughn, a Detroit real estate magnate who had bought the Lionel product line from General Mills in 1986. See Lionel, LLC.

On April 15, 2004, fire destroyed the former Lionel train factory located in Irvington, New Jersey. According to a report from the local fire department, it took 100 firefighters to extinguish the blaze. The building had been vacant for ten years, and was in a state of disrepair, according to Fire Chief Don Huber.

The old Lionel factory in Hillside, New Jersey, where Lionel Corporation manufactured trains from the early 1920s up to 1969 still stands. Photos of the Factory can be seen at the ihorse.com website.

The former Lionel factory at 28 Sager place, Irvington, NJ; and the Hillside, NJ factory are the front and back doors of the same building. The building that housed the last Lionel office, located at 26750 23 Mile Road, Chesterfield, MI, is currently for sale. The former Lionel assembly factory was located at 50625 Richard W. Blvd., Chesterfield -- a short drive from the office building.