Toys R Us's future in the UK is hanging in the balance ahead of a key vote by creditors later on Thursday over whether to back the firm's rescue plan.
The Pension Protection Fund (PPF) – which wants the toy retailer to put £9m into its struggling pension fund – has said it will vote against the plan.
Failure to agree a deal could put all its 3,200 staff at risk of redundancy.
However, reports suggest Toys R Us has put forward new proposals to try to reach a last-minute deal with the PPF.
The PPF – whose duty is to pensioners and not the company – wants money upfront to secure funding for Toys R Us's staff pension scheme, which has a deficit of more than £25m.
Toys R Us, which has 100 stores and outlets in the UK, has put forward a company voluntary arrangement (CVA), which is a step short of going into administration.
Under its CVA plans, Toys R Us is proposing to close at least 26 loss-making UK stores, a move that would put up to 800 jobs at risk and mean rent cuts for landlords.
The company sells largely from warehouse-style stores at the edge of towns, but says these are now "too big and expensive to run". It is also finding it hard to compete against online toy retailers.
Toys R Us factfile
- The toy retailer started in the US in the 1950s
- It reached the UK in 1985, as a subsidiary of the US chain, when it opened five stores
- It launched its UK website in 1996
- The retailer now has 105 stores around the UK
- Its flagship stores are at London's Brent Cross shopping centre and in Bristol
Julie Palmer retail expert BTG Advisory, part of the accountancy firm Begbies Traynor, told the BBC the CVA could just be putting off the inevitable: "It's a little bit of a moral dilemma… is the CVA going to make the position of employees worse or is it going to make it better?
"It might make it better in the short term if it preserves jobs, but if all that's going to do is postpone the pain and potentially increase the deficit at the pension fund then that might long term make their position worse."
Earlier this week, Toys R Us had reassured shoppers seeking last-minute presents by saying: "There will be no disruption for customers shopping through the Christmas and New Year period."
Toy's R Us's parent company in the US is in formal bankruptcy protection proceedings. Recent reports suggest it is considering closing between 100 and 200 stores in America.