Mattel is bracing for $200 million in severance and restructuring costs through 2019 as it struggles with retailers tightening inventories and “challenges” within its Toy Box Division and “certain underperforming brands,” the company said in a SEC filing.

In filing Monday seeking to raise an additional $1 billion in debt, Mattel said its gross sales for the current year ending Dec. 31 will decline by a mid-to-high-single digit percentage from about $5.45 billion a year ago. The forecast led all three major credit rating agencies Monday to downgrade Mattel after it announced plans for selling $1 billion in high-yield notes due in 2025. All three firms – S&P Global Rating, Moody’s and Fitch Ratings — rated the company below investment grade. The new notes will help fund operations and repay $250 million in debt due in 2018.

Mattel was hit when Toys R Us filed for bankruptcy in September, forcing it to reverse $43 million in net sales in Q3 ended Sept. 30. Mattel has since embarked on a $650 million cost savings plan as the company slashes jobs and eliminates “non-core, sub-scale, and unprofitable brands,” it said. The challenges within Toy Box come two years after its creation as a division meant to spur innovation and risk-taking within the company; an augmented reality version of its ViewMaster was one of its achievements.

About a third of the cost savings will be recognized in 2018, with the remainder coming the following year. As part of the cost-cutting, Mattel also will review its advertising budget with an eye toward focusing spending on “core power” and “A+” licensed brands, the company said.

Mattel’s struggles come despite its hiring former Google executive Margo Georgiadis as its new CEO earlier this year and the wider toy industry having posted a three percent increase in sales in the nine-month period ended Sept. 30.

Contact:

Mattel, Joseph Euteneuer, Chief Financial Officer, 310-252-2000