1d ago

TIL that Toys R Us wasn't killed by competition, but by private equity companies

inthesetimes.com How Private Equity Killed Toys “R” Us

Private equity firms bled the company dry to turn a profit, and now mass layoffs are imminent.

Basically, the company had to pay for its own buyout when private equity firms KKL, Vornado, and Bain bought the company for $6.6 billion, mostly with loans.

Because the company then had to pay off those extreme loans, they were forced to sell off their assets and property, which they leased back from the very private equity firms that now owned them.

The same thing happened more recently with Red Lobster and JoAnn Fabrics.

241 comments

This is one of those situations where it once again shows that:
Private equity stakes in companies are bullshit and at the very least need to be utterly regulated to hell and back.
More specifically, it should not be allowed to buy a company "on debt". If you want to buy somebody, you need cash-on-hand to do that. That's the only allowed form.
- Selling property to rent it back should also be super illegal. Is there ever a time this makes sense. If you want to sell land to profit, close the fucking place, there’s no way it’ll suddenly be more profitable while renting.
  
  Not defending PE, but there are situations where this type of thing would make sense. If the rates were low enough a company could cash out it's property value using something like this and use the cash for an expansion, to make a moonshot investment, or maybe as a last ditch to survive in a downturn.
  That's not what's happening here, but turning real assets to cash through debt to then invest in the business is a decent tactic.
  
  It would make sense for me to sell my apartment and rent it back because I get fucked by ODSP if I take a roommate while I'm an owner and I can't afford to live here alone.
  It would make sense for an entity that needs to make use of their equity for other things. Many many individuals and companies mortgage their properties or get secured loans. That's basically the same thing.
  
  If you’re a business owning a building, maintenance is another thing you have to take care of as well as the business. If you’re not equipped to maintain the building or pay people to do it, then it might be better to rent and have the landlord take care of that stuff.
  My union is selling our building because it wasn’t really anybody’s job to keep up on maintenance for the last 30 years. Now people that care are in there and they got estimates and whatnot, and it came to like a $600,000 bill to get it all caught up.
  So we’re partnering with a local non-profit and moving our office in to their space with meeting rooms and whatnot that we can share. We have one meeting a month and training sessions already happen elsewhere. All of work is done away from the building aside from 3 people in the office full time, so it makes sense in our situation.
- it should not be allowed to buy a company “on debt”. If you want to buy somebody, you need cash-on-hand to do that. That’s the only allowed form.
  A company is not somebody, it's a thing, like a home or a car that you have no problem getting a loan to pay for. Or maybe it's special because we're talking about a means of production? C'mon. Say it. Say "means of production."
  
  No, no companies are people. Buying and selling them is slavery.
  
  Citizens United has entered the chat
  
  The very first words of US law:
  1 U.S. Code § 1 - Words denoting number, gender, and so forth
  ...the words “person” and “whoever” include corporations, companies, associations, firms, partnerships, societies, and joint stock companies, as well as individuals;
- If we had a strong reform minded government, our leaders could oppose these parasites, and then make examples out of those that mistreat our productive companies. Like which of these private Equity douchebags can't be hit with a crime for something or another? Not a single one, you can get everyone with the tax evasion charges.
  We need leaders that protect us from these monied parasites.

below is a reply to a comment I made below, pasting here as I find it crazy how this went down and is allowed.
For those curious I did a little digging. I’m on mobile so won’t be going in and out to add company names etc.
Basically, the private equity firms got together and said let’s buy Toy R Us for $6.6B but we only want to use say 300M of our own money and get a loan for the rest.
Then they bought Toys R Us but made them sell all assets to equity firms which then leased them back to Toys R Us so they could pay back the loans. This means Toys R Us are paying hundreds of million a year to cover loans and can’t put that money into making a better business.
The private equity firms also made Toys R Us issue dividends in the hundreds of millions so private equity can make money.
In the end private equity walked away with over $1B in profit whilst Toys R Us declared bankruptcy with $5B still left to pay.
What a fucking insane system. Like how many people lost their jobs so these ghouls could make some extra cash off its downfall.
And people think I’m crazy for making my life harder by not shopping at places like Amazon or being a pirate and not giving money to Netflix etc.
I feel I am living in crazy land. Like the Uk has all our pensions and shit tied to the damn stock market, ensuring we can never really leave this system.
- Sweet jesus. How is this not some kind of hyper mega ultra fraud?
  
  I have no idea and it seems insane to me.
  I was looking for the same thing in my country, UK, thinking we can’t be as bad as America, but nope many of the companies that have died during my life have been due to LBOs. The world is insane and I don’t see how we can change it.
  In the UK I learnt that Asda one of our largest supermarkets is in a similar place due to two brothers doing an LBO to buy it. Now it’s saddled with debt meaning it won’t be able to innovate like Tesco or Sainsbury’s and thus will likely just bleed customers. Makes me wonder why these two brothers with more money than God would want to carry on, like I literally can’t comprehend wanting more than you need. Perhaps I have different motivations as I see time as my most precious asset and will earn less money than I could just for the easier life of being able to chill more and do the things I like.
  
  the primary shareholders of a company can usually do whatever they please (as they should in the case of some proprietorship) as such can sell whatever assets for whatever price.
  
  Because bankers buy politicians and if people complain they buy news coverage to call the naysayers socialists
  
  I'm kind of financially illiterate
  what part of the firm's actions were fraudulent? if they make an offer and toys r us accepts, there's nothing predatory going on is there?
- What I don't understand about the whole thing is who ends up holding the bag of all that debt?
  Like banks that lend them billions must be intelligent enough to know how private equity takeovers like this work. So if they lend them money, they surely would want to get that off their books asap. But who do they sell it to? I can't imagine there is any type of reinsurance for this, since insurance providers should know even better.
  I imagine some of the debt is to employees and small contractors, but can that really account for such a massive sum?
  
  So the Equity Holders (The Private Equity firms) were largely shielded from risk as they had taken out billions in dividends and they had a small equity state relative to the debt meaning their downside was limited.
  The creditors (large banks) were left holding the bag, but they’d had years of interest payments so they wrote off the rest and likely still made some profit.
  Employees, suppliers, and landlords. Employees lose their jobs, suppliers get pennies on the dollar for what they’re owed and landlords might have got some money but still not all.
  So in short it was the banks, but don’t forget they had years of interest payments and after all they took the risk.
  
  Companies are valued by earnings-per-share, independent of the assets. So if the P/E ratio is too low the company costs less than its assets and it pays off to sell the parts.
  https://en.m.wikipedia.org/wiki/Price%E2%80%93earnings_ratio
  In this case I heard a rumor that Amazon did it to dominate the toy market, so losses could have been acceptable.
  
  Alot of debt gets bundled into bonds or other investment vehicles and sold. So small retail investors, retirement funds, etc end up holding the bag. Sometimes the banks lose, but they can take tax write offs and if the loses are too great, they can often get bailed out by the government.
- IIRC it was Mitt Romneys firm that did it to (technically after he left leadership, if i recall)
  
  Impossible! Mitt Romney is one of the good conservatives!
  /s because tens of millions of liberals actually believe that it's true.
  
  Just saw this after making my comment. I believe it was.
  Bain Capital
  
  Not technically, it was years after he left Bain.
- Look up Cellar boxing, you’ll see all the companies that were driven out of business because of this strategy
  
  It is well enough that people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning.
  Truer now than when Henry Ford said it like a hundred years go.
  The SEC exists to shelter Self Regulating Organizations from any threats of democratic governance or law enforcement. Oh ya and to keep up the legalese charade that there literally is no such thing as counterfeit stock (because the Secret Service has purview over counterfeiting for some strange reason)
  Fuck the stock market 🖕
- In a sane world that would be life in prison illegal.
  
  Sadly we live in crazy town.
  Wait until you hear about using shorts to drive a company out of business or stock buy backs.
- Wasn't it Bain Capital (Mitt Romney's old place of work), or am I misremembering?
  
  Yes, that was one of them.
  From OP
  Basically, the company had to pay for its own buyout when private equity firms KKL, Vornado, and Bain bought the company for $6.6 billion, mostly with loans.
- And people think I’m crazy for making my life harder by not shopping at places like Amazon or being a pirate and not giving money to Netflix etc.
  You're not crazy; you're smart.
  The average person just doesn't want to accept how stupid they are.
  
  The hypersane smart get called crazy by conformists.
- Its best to plan to not have a retirement fund. Plenty of communities just take care of each other instead.
  
  I’m not sure what you mean. We have a state pension tied to the stock market.
  I also have a private pension too. I don’t see how not planning for retirement can be beneficial?

Yeah, this is the case for most "public to private" company moves, and other types of private equity acquisition deals. They are all just a massive shell game to liquidate a company's value and transfer it to those private equity companies. Vulture Capitalism
- Comical to read this when I just saw a $50 billion dollar sale of EA going private being bought by private equity firms, haha.
  
  My first thought as well. Of companies to lose to further "investor" shittery, I can't say I'll lose much sleep over EA if that turns out to be the case.
  
  EA was down the path of being awful, long before that. But yeah...
  
  I was guessing that it was going to be leveraged as a propaganda outlet given the Kushner and Saudi connections, but it does seem more likely that it'll just be hollowed out and thrown away.
  
  If EA gets bled dry by private equity, it'll probably be the biggest company to go down that way ever.
  
  I don't really know if that's the same kind of animal though. The Saudi royal family is trying desperately hard to diversify. Into as many different revenue streams as they can. You know to Stave off the coming disaster. So I think maybe they're actually in it for real with EA, though why you bank on a video game company being a long-term investment I'm not 100% sure. Point is they have so much money now I doubt it's for a quick profit. They have so many projects right now that are so risky they're basically burning cash.
- Death Spiral Financing is one of those things that should be shouted from the rooftops by anyone who wants to spread anti capitalism. It so cleanly displays the evil inherent to the system.
- vulture capitalism
  No other kind. Every major gain is just made by eating a corpse you don't acknowledge-polluting the air or putting plastics in all our blood or slopping us with malevolent ux and llm's.

And the same thing is happening to hospitals all over the US, which should fucking terrify you.
- Yeah but they have Jesus so they'll be okay.
  
  What’s crazy is that the Catholic hospitals are becoming your best bet.
  So you’re kinda right!
- We should really restrain what private equity can invest in.
- Already happened, hospitals, clinics, ambulances, but also housing.
  These parasites are going to ruin us all and we are doing nothing about it.

What will really shift your thinking is finding out that they have done this to almost all the hospitals in the United States, which is part of the reason healthcare costs have skyrocketed.
Hospitals need more to pay their leases, health insurers need to pay more to feed the hospitals machine, premiums go way up/more services restricted/more cost share (copay etc)
If you think it’s shitty that consumers can’t own anything anymore, they stole your wellbeing services while you were removed about how little is still on Netflix these days
- This is enough reasoning to say that capitalism is the single greatest enemy of mankind. The search for endless profit will kill everyone.
  
  Careful now, they're about to classify criticism of capitalism terrorism.
  
  Nono its the best system. All others have failed. You cant have the American dream without capitalism.
  /LIES FROM FASCISTS
  
  The culture of consumption is the greatest threat to humanity.
  Capitalism, and even communism, are just means to that end.

The fact that they can buy a company by going into debt and immediately transfer the debt to the company is fucking insane. Maybe we need to figure out how we as individuals can do that and just fucking crash the lending industry entirely? Can I make my house buy itself for me and then "whoopsie, the house can't pay the bills, guess it will file for bankruptcy and hand me a big ol' stack of cash".
- That's how landlords work.
  Take loan, buy houses, house has to pay back loan via rent, rent is paid for by renter.
  Landlord gets house for free, everything paid by renter.
  
  And the same thing happens to banks for people with mortgages.
  
  In this scenartio, the Landlord also owns the maintenance company, so the renter pays the wages of the maintenance advisor and maintenance costs.
  
  the same happens to most mortgages, namely income goes to the lender and you get a house.
- I'm not going to say exactly what it would take, but it rhymes with Bolotov Cocktail
  
  I couldn't possible know what you mean, but that sounds delicious.
- They will never, ever give us equal rules willingly. The only way that's going to happen is if we build a new financial system, immune to their Pinkertons and police.
  
  You will not build a new financial system without structures of power. The best we can do is to understand the structures of power and how to combat them.
- Can I make my house buy itself for me and then "whoopsie, the house can't pay the bills, guess it will file for bankruptcy and hand me a big ol' stack of cash".
  2008 called...

A victim of the good ol leveraged buyout which should be fucking illegal right alongside stock buybacks.

TIL: stock buybacks were considered insider trading before Reagan made them legal
- Is there anything that Reagan hasn't fucked?
  
  Your mom.
  
  Whatever he didn't got fucked by Clinton.
- The entire investor community is filled with shitbags.

This is like me taking out a loan to buy a car and then expecting the car to make the payment.
And since all the debt is on the company and not the people/organization who bought the company, they don’t suffer any of the repercussions of defaulting on the loans. Why this isn’t illegal is beyond me.
- It was illegal, then Reagan changed that.
  
  Because of course it was Reagan.
- Elementary my dear billwashere, in one word: money.
  People don't notice the leeches, so noone cries out. This enables said private equity leeches to ~~bribe politicians~~ make considerable donations to various political action committees. And believe it or not, politicians like money.
  
  Well, you wouldn't want those politicians to be poor?
- This is like me taking out a loan to buy a car and then expecting the car to make the payment.
  It's even worse than that. Imagine you bought a car from a dealership and were making monthly payments on it. I take a loan to buy your debt from the car dealership, sell your car to pay my loan off, and then expect you to continue making your monthly car payments to me. You file bankruptcy to get out from under the debt, but by then I've pocketed months or years of your car payments and come out with a tidy profit.
  And then I do it to hundreds of other people, over and over again, as long as other rich people are willing to loan me money. Which of course they are, because running companies into bankruptcy is incredibly profitable.
  Something something road to serfdom.
  
  Well fuck … that’s even more depressing.
- Well, in theory it's the responsibility of the banks to not make bad loans. If private equity passes on their debt to the company they bought, and then that company goes bankrupt and the private equity walks away free, that's still the bank's problem and they're gonna lose a lot of money. Of course the problem is banks have a pretty bad track record about being disciplined with their loans.

The actions taken by private equity companies seem very similar to those taken by organized crime syndicates when THEY take over a business
Odd, don't you think?
- Like in Goodfellas, cannibalizing their own community. Embezzle and steal everything you can, then torch the place for the insurance.
  But in Goodfellas, the owner of the restaurant approaches the mafia and asks Paulie to "be a partner", so he can get Tommy to stop terrorizing the place AND running up tabs he has no intention of paying.
  Imagine some short mafia type with a Napoleon complex walking around the Toys R Us aisles, knocking merchandise off the shelves while harassing kids and their mothers.
  I betcha the equity firms approach with a silk tongue and Wall St technobabble jabberwocky. I know those CEO business types, the read their CEO magazines chock full of pseudoscience articles like, for example, determining a personality type via their handwriting style, the hooks and curves of their calligraphy. Corporate astrology, just as gullible to fancy jargon as the proverbial Man Down The Street.
  
  Nah. They have deluded themselves with ideas of "rescuing" the company. But they protect themselves financially first. Then they don't have the awareness to show that a business could have just made 1-2% a year forever instead of selling off assets for a chance at 4Xing their investment. They think its how life works. Take the big risk and never consider the costs as long as your ass is covered.
- Capitalism is organized crime

Yeah?
Isn't that the entire thing that private equity firms do? Buy up companies, sell all their assets to the private equity firm, then have them lease it all back for insane amount until it's bankrupt.
Makes a whole lot of short term profits, destroys the company and it's employees. No fucks given
Private equity firms are a cancer (amongst many cancers) on humanity
- They killed Karstadt this way, V&D, and I bet a bunch of other department stores too.
- Looks like EA is next on the chopping block.
  
  Glad I stopped caring about the game industry.
  Now it's just fun to laugh and point the finger at all the morons/losers getting taken advantage of for being stupid.
- It wasn't always this bad. It started out as a way to improve local businesses. The problem is the internet and all the hype
  
  Ummm private equity firms have been evilly destroying companies since the early eighties at least.
  
  I hate to tell you this but private equity has been a problem long before the Internet went mainstream. I think venture capital firms we're a product of a post-WWII world trying to capture as much wealth as possible during reconstruction. I'd have to check some sources to be sure of that and I'm really not motivated enough to do it.
  
  Don't see how the internet plays a role in firms purchasing stuff then gutting them for profit.

Hooray. Back to the slash and burn asset stripping of the 80's. Isn't capitalism great?

It isn't the only company to die this way. Sears was cellar boxed the same as toys r us. It was what was intended for gamestop but the whole wallstreetbets thing happened and prevented it.
- The methods that they use to do this are crazy (installing a hostile executive, naked short selling, etc), the fact that they got caught while doing it to gamestop caused some crazy shit to be brought to light, and nearly wiped out the entire market
- I live in a place that suddenly became a fucking healthcare desert because of this shit. The local hospital network was bought by vulture capitalists who sold the real estate to themselves and then leased it back to the hospitals, racked up enormous debt almost entirely due to obscene bonuses they paid themselves, then declared bankruptcy. The hospitals are all closed now but the vulture capitalists have their cash and still own the real estate. I recently had to spend two days in the ER of a far-away hospital that has been swamped with the overflow, with my mom in a bed in the hallway for the entire fucking time. Muigi Langione is the thing to do.

Time to kill private equity…..with crippling regulation and accountability of course
- Not when you live in a country where private equity basically owns the government.
- Nah just make the rich people pay their taxes. Then they won't have money for stupid shit like this
  
  One of the reasons they have so much money is the financial trickery that private equity employs

And now they want access to 401Ks

Did you know companies can take out loans to buy their own stock to raise the value.

This has become a common thing. It's assumed brick-and-mortar is dying due to Amazon and Temu and such. It's not; they've been on that path for a long time, and the companies that were going to die to it have already gone. However, it is a popular perception.
Private Equity gets to use the popular perception as a cover for shady ass shit.
Shopko was a midwestern chain of department stores. In their final years, they typically staffed like three people for the whole store. It's not as big as a Super Walmart or anything, but it's a sizable store in any case. They had one person on checkout, one in customer service, and one more running around the rest of the store. Maybe one or two more, but suffice it to say, it was deeply understaffed and it felt like it.
Behind the scenes, private equity had been taking out loans against the store's real estate, gave themselves big bonuses with that money, and left the company as a whole with unaffordable debt. Also, the money being taken out at the register for sales taxes wasn't actually being paid to the state.
Shopko was murdered. There is a standalone optical division that still operates, but the rest is gone.

I read something about the birth of these private Equity firms sometime in the late 70s or early '80s when a firm bought out this other productive firm and loaded them up with debt, paid themselves every which way they could, sold off any profitable parts of the company, then declared bankruptcy and stiffed everybody else walking away with a boatload of cash, unemployed workforces, and razed Pension funds.
We have been celebrating this type of behavior for decades now, Behavior I think exemplified in Monty Python's skits of the pirate building seizing the other buildings like it was a pirate ship.
- That was much of the plot of Wall Street.

It’s a PE firm. It’s what they do.
- Bloody parasites
- PRIVATE EQUITY. PUBLIC ENEMY!

Is this why the one in my area has been closed, but hasn't been turned into something else? It even still has the signage.
- No, that's because no one has turned it to anything else. So the owners collect a tax write off until they can sell it or lease it. The ones in my area have been long since torn down or remodeled into something else. It took 20 years for all the Kmarts around me to disappear. Large assets like these take time to move and are expensive to acquire. Very few companies are going to jump on them, especially since more often then not, a new building is cheaper then a remodel on a 30 year old one.
  
  yep, had the same thing with Kmart in my area.
  it was only about a year and a half ago that something started to renovate the location for a new store, about a year ago for them to move in and open, and about 6 months ago for it to shut down and be empty again
- Yes

I live in the area the HQ used to be. I know a lot of middle management who got screwed very hard by these guys.

So private equity got their real estate for cheap. Might be intended
- Assuming they owned the places and don't rent everything.
  
  Read the thing

It still exists here in Japan for some reason!!
- Japan feels like it’s part of an alternate universe. Tower Records also still exists here.
- From the Wikipedia page:
  In September 2017, Toys "R" Us filed for bankruptcy protection in the U.S. and Canada. In June 2018, Toys "R" Us closed its remaining 200 stores after entering bankruptcy, however certain international divisions outside of the United States continued.
  In January 2019, the global (excluding Canada) Toys "R" Us intellectual property was transferred to Tru Kids, Inc. In August 2021, Tru Kids announced that Toys "R" Us would be opening over 400 stores within Macy's starting in 2022. A few new standalone stores would open, starting late in 2021. The flagship store is located in New Jersey at the American Dream shopping and entertainment complex. A second flagship store was opened inside the Mall of America in Bloomington, Minnesota, in November 2023.
- Yeah it feels like Japan got the 70s/80s retrofuturism timeline blade runner and cyberpunk2077 are on. It's not good–it is at least more sensibly evil.
- It also exists in Canada.

Yeah, the term "venture capitalist" is very negative in my mind because of how they destroy companies from the inside out to profit themselves. Fuck them.
- More like vulture capitalist.
- Does the term “venture capitalist” refer to these types of activities? I thought that was more about funding startups (like in Silly Con Valley) and this was more private equity holders.
  Or are they two sides of the same card?
  
  I'm not sure honestly, I know venture capitalists buy companies usually with the intention of expanding or helping grow, but lately it seems like they pass around their debt, force them to bankrupt, liquidate and kill it.

Pretty much nothing in "the economy" works like it does in theory. It's always way more complex so the people with the most power and money can squeeze more exploitation out of it. I really like how this guy explains it
https://www.facebook.com/reel/976701137942045
https://www.youtube.com/shorts/1LcJjd6Wosw
He's got a whole series on Private Equity
- I think that's the natural outcome. that's the emergent behaviour of capitalism.
  those with more money have more power and more influence to make the system better for those with money and power.
  the rest, like almost all "economics" its just BS to hide that simple fact.
- Sometimes teenagers ask me about how the stock market works.
  I love explaining shorts, because the reaction is always “how does that even make sense?”
  
  The short answer (ba dum, tisssss) is that some forms of mutual funds buy a little bit of every stock rather than picking and choosing. Then, for reasons never really made clear, they let other investors borrow those stocks as long as they return them later.

DOGE used this same model on the US government.
Capitalism is not rational

I watch the YouTube channel "Company Man" that does a bunch of interesting business stories. 95% of the "Decline of (brand)" or "Rise and Fall of (brand)" videos are because of leveraged buyouts.
A group of idiots borrow billions of dollars, throw the unrecoverable debt onto the books, slowly killing the company, and then it's dead.
Who loans this money? How does that work? I understand the rest of it about being a bastard who collects millions in salary and bonuses while driving a company into the ground. I just don't understand where the money comes from, or why.
- The best book I've read about private equity is called Songs of Profit, Songs of Loss by Daniel Souleles. It's an ethnography of private equity.
  Private equity is the logical extreme of the idea of shareholder value. Companies are bought, stripped for parts, and mined for resources. The money comes from wealthy people and institutional investors like university endowments, pension funds, etc, and some years it is a very high-return investment. Other years, not so much, see the relationship by the University of California and Blackstone as an example in recent years.
- It may be U.S. plutocrat strategy to weaken political enemies by killing their companies.
  Consider Microsoft destroying Nokia and their Linux phones to benefit fellow American companies Apple and Google.
  Consider the Destruction of OkCupid as an attack against its liberal-skewed user base.

I spent weeks waiting in line at my TRU for a switch and they sold out of it and every game every day. The day after I finally got mine and BOTW, they closed the store.
They were making hand over fist money when they closed

Same with Sears, right?
- Picked apart by vultures for all that prime store and warehouse real estate they owned by virtue of having been around since the 19th century.
- Yes and No. Sears could have limped along for longer but the geriatric leadership they brought in made a bunch of stunningly bad decisions. Sears built their business on catalogs and shipping direct to consumers. With their huge distribution network, trusted name, and network of stores they could have embraced a hybrid model and been on the cutting edge of e-commerce but the geriatric fucks they put in charge doubled down on the retail model they had always known but with shittier service.

Also pensions, airlines, and restaurants.
- And fucking hospitals
- Major reason why the only move is not to play in this economy.
  If you're not breaking the law or screwing someone else over, you're the one getting fucked.

They told US TARGET killed Geoffrery!!!
- Weird. I heard Tyrion did it, but he did claim he was innocent!
- Target ended up getting the rights to the brand didn't they?
  What happened to Babies 'R Us? The one near me where we registered for our oldest got turned into a trampoline park. We took him there for his 9th birthday a couple weeks ago.

Leveraged buyout is insane and should be so very very illegal.
- Let them leverage but they have to pay it back. None of this transfer the loan shit.
  
  Agreed. If you can take a loss forward 20 years on your taxes, the government should be able to go after leveraged losses for 20 years too.
- All we really need is to make sure the people investing in and making these decisions get financially destroyed

TRU currently exists outside US but by retailers in other countries using the brand for their toy stores.

Toy R Us is still a thing in Canada, you can just go there and get your kid legos like its 2002

Rumours of Geoffrey's death where exaggerated
- I don't know I went into one recently and it is. A shadow of its former self. Looks like it is going out of business.
  
  Well, yeah but its not yet dead.
  To be fair most retail is dying, no one has money for niceties (as a lot work in retail or paid like they do)
- It looks like he’s flashing us.
- Same for William Shatner.

It's a cycle I can describe, but cannot understand. A business has some minor decline in sales, or profits, or whatever. Private equity firms convince one group of people this is the biggest disaster, and the company is ruined forever, hardly worth anything. Simultaneously, they convince a second group of people that the company has a strong business model, and will recover soon.
The second group lends the company a ton of money to buy itself from the first group of people, for the private equity firm. Now, the private equity firm tries to make a temporary spike in value, pay themselves large dividends, and sell the (now actually, fundamentally broken) company for as much as they can.
The original shareholders lose. The employees of the business lose. The banks (or their insurance company) lose. Private equity wins.
My lack of understanding is, if I were a bank, I would spot this scam either the first, or second time it happens. Next time Mitt Romney came to ask me for ten billion dollars, I would tell him to pound sand. How has it taken actual professional bankers hundreds of times to (still not) see the cycle?
Likewise, the insurance companies backing some of these loans must know they've lost billions on this. Why haven't they done anything?
- The banks get paid first. As long as the company's assets are large enough, they work with the PE firm to strip anything of value to repay the loans, the the PE firm walks away with whatever's left.

Mitt Romney worked for Bain Capital.
- They wanted to run the United States like Bain Capital as well. Thank God we came to our senses and instead ran it like the dirty real estate developer in bed with the mob!

yea shame - fuck bain and the mormons lol

TRU is still in Canada, but its starting to rapidly die all of a sudden.

Eddie Lampert set the gold standard for corporate raiding in the 21st century when he orchestrated the Sears/KMart merger and then spent the next 18+ years liquidating all of Sears Holdings fixed assets.
Drowning the company in the bathtub on one hand while on the other, constantly crying to anyone who would listen about the struggles of retail. Buying up the retailers debt to create the public image of a benevolent shareholder who just wanted to offer lifeline after lifeline.
It took a lot longer than some of the smaller private equity takeovers. The combined organization was enormous at the time of the merger in 2004 and still very much financially viable. It's even possible that Lampert intended to make an earnest go at the retail business initially. Although I kind of doubt it. Either way, at some point he figured it was more profitable for him to slowly liquidate the business than continue trying to compete in a harsh retail environment.
It took years for creditors to figure out what was happening and the general public never really caught on. Lampert is a greedy bastard but I have to admire his incredibly patient handling of that whole situation, which was honestly brilliant.
20 years later, Sears and KMart have gone the way of Montgomery Ward, even if their websites are still functioning. Tens of thousands of people lost their jobs and Eddie Lampert is far wealthier than he was when he started.
- Sears could have been what Amazon is today. Hell, it the 19th century, it WAS was Amazon is today. But the focus is so often on financial trickery over actual sound business practices

A song as old as time

The thing that blow my mind is, who is loaning these Private Equity firms all this money?
They have to know how it works.

Bust-out.
https://m.youtube.com/watch?v=ZPtjyqgZAUk
Check the highlighted comment. 😄

I just love private equity

I think the real reason they died is because they had high markups and hence, nobody could afford to shop there. The one we had in our next town over was very expensive and even though it was cool, we could never go there because it was expensive. With the high markup comes the low volume, and hence debt. The high markup only works with the most popular of a category, but it still kills your brand if it's anything more than premium price for premium products. Wallmart and other box stores, and eventually amazon also killed it because it's a crowded market. Cool concept for a store though. Reminds me of the time before national and international corporatism when you could have little mom and pop stores like that, with hand picked toys that were really cool.
- This is a well studied case. It was private equity that killed them.
  
  I don't know anything about them tbh.
- Not at all.
  Just go look it up it was a leveraged buy out (LBO) and was the main factor in its collapse.
  Edit: For those curious I did a little digging. I’m on mobile so won’t be going in and out to add company names etc.
  Basically, the private equity firms got together and said let’s buy Toy R Us for $6.6B but we only want to use say 300M of our own money and get a loan for the rest.
  Then they bought Toys R Us but made them sell all assets to equity firms which then leased them back to Toys R Us so they could pay back the loans. This means Toys R Us are paying hundreds of million a year to cover loans and can’t put that money into making a better business.
  The private equity firms also made Toys R Us issue dividends in the hundreds of millions so private equity can make money.
  In the end private equity walked away with over $1B in profit whilst Toys R Us declared bankruptcy with $5B still left to pay.
  What a fucking insane system. Like how many people lost their jobs so these ghouls could make some extra cash off its downfall.
  And people think I’m crazy for making my life harder by not shopping at places like Amazon or being a pirate and not giving money to Netflix etc.
  I feel I am living in crazy land. Like the Uk has all our pensions and shit tied to the damn stock market, ensuring we can never really leave this system.
  
  FYI, the moment I realized this was copy pasta from before, I stopped reading. Helps to reword your point.
  
  Yeah publicly traded companies are almost always terrible. I guess they were already dead when they went public and all the finance people started to get their fingers in it. Not much you can do there except maybe support local noncorporate businesses or find noncorporate large companies like steam.
- Toys R Us was no more expensive than anywhere else. They charged the manufacturer's list price, with occasional sales, like everyone else. Perhaps Walmart or Target had the same items at slightly lower prices, but not significantly, and a few aisles of selection couldn't compete with TRU's giant stores full of toys.
  It's a shame that a company that held a unique position in the marketplace, was destroyed not by their own bad business practices, but because of the predatory actions of financial sociopaths.
  
  We should note that Toys R Us was also struggling at the time, although they would have had a better chance of success by not having 300-400M a year in debt payments to make; they could have used that to improve customer service and stuff.
  I’m not defending the LBO here, just adding a little context.
  
  Last time I was in one I was appalled at the prices. Plenty of customers though.
  
  Probably a bit of both. I distinctly remember that everything I looked at in there was more expensive than normal around 2000. Maybe it was different later.

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