Debtors of bankrupt Toys R Us Inc. are asking a U.S. federal judge to force Hong Kong-based Fung Group out of the joint venture comprising the toy retailer's Asia business, according to documents filed Aug. 4 with the bankruptcy court for the Eastern District of Virginia.

Toys R Us Asia runs 400 stores and eight e-commerce sites in Greater China, Japan and Southeast Asia. It operates as a separate entity from the North American operations that liquidated the U.S. stores, and is not part of the bankruptcy proceedings initiated in September 2017. The Toys R Us debtors currently own a stake of 84.87%, while Fung Group unit Fung Retailing Ltd. holds 15.13%.

The group of debtors, which includes Toys R Us Europe, said in the court filing that they expected to receive a bid of $760 million for their stake in Toys R Us Asia from an unnamed suitor. The debtors plan to accept binding bids for the business until Sept. 12, with an auction to possibly follow in New York on Sept. 17.

Ahead of the potential auction, the debtors have asked the U.S. bankruptcy court to invalidate Fung's right of first refusal in the sale process, and force the company to sell its stake in the JV.

The anticipated bid falls below the previous offers of more than $1 billion that Toys R Us said it had received earlier this year. The debtors allege in the court filing that Fung's right of first refusal made "robust initial bids" drop "dramatically," possibly benefiting the company as a bidder looking to acquire the nearly 85% stake.

In February, Toys R Us was reported as holding talks about selling its stake in the Asia business to Fung Group, which controls sourcing and logistics company Li & Fung Ltd.

Fung Group did not immediately respond to a request for comment by S&P Global Market Intelligence.