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.
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!
Toy R Us is still a thing in Canada, you can just go there and get your kid legos like its 2002
It’s still kind of a thing in the USA, you just have to visit a Macy’s department store at the local dying mall. The Toys R Us is a small section in the back.
Which is far more depressing than if the brand was outright dead.
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
DOGE used this same model on the US government.
Capitalism is not rational
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”.
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.
You never change things by fighting the existing reality. To change something, build a new model that makes the existing model obsolete.
— Buckminster Fuller
Structures of power… You mean “guillotines”?
I mean things like this https://m.youtube.com/watch?v=rStL7niR7gs
I mean things like this.
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.
Justice often is.
I use fireball in mine. So the revolution will smell like cinnamon.
Fireball and gin. Tastes like Christmas.
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…
TRU currently exists outside US but by retailers in other countries using the brand for their toy stores.
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
I generally feel like leveraged buyouts for numbers into the billions are just inside jobs for those selling.
Stay with me for a sec.
So the seller makes a closed door deal with the “buyer” to funnel money back to them personally after the sale is done. So in this case, say, they commit 3.6bn to the “buyers” and pocket 3bn for themselves. Almost the entire purchase is leveraged, with the expectation that it will become unsustainable and go bankrupt shortly after the purchase.
The buyers don’t really give a shit, they’ll write it off, collect whatever they can from insurance, etc. They didn’t really want to company anyways, so they let it fold.
The money they took home from the deal with the seller is entirely theirs, the company bears the weight of the debt and the consequences of defaulting on the debt, so the execs that made the move are basically free and clear.
Everyone wins, except, you know, the poors who work at the purchased company, the banks, who don’t give a shit, and insurance people, which… Nobody gives a fuck about them…
At the end of the day, the execs of the purchasing company get rich, the sellers get rich, and that’s the fucking point.
If the sellers instead just closed up shop, they would get maybe a fraction of the money they would from selling it, mainly in selling off assets… It would be a pittance compared to this scheme.
All they need to do is find someone they can buy out the morals of, to complete the deal. This is surprisingly easy in the corpo world.
Ok, but who is providing the loans for the buy out. When they default on the debt someone or some thing is not getting paid. If that were the case eventually no company would loan money for a leveraged but out right?
The banks, and/or the insurance companies.
In the case of the banks, the money isn’t real and never existed in the first place.
The fiat money system is pretty fucked when you understand it.
At worst they take the “loss” and at best, they get bailed out by public dollars.
Pick whatever fits your ideals.
Every time I read something like this, it makes me want to burn money.
Well, money is only as valuable as we think it is, and what goods or services it can be traded for.
The money itself carries very little value itself, only what we assign to it, or associate to it.
If the economic system based on the currency currently in use collapses, the money you have won’t be worth the paper it’s printed on.
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Bear with me for a bit, because i don’t understand these schemes.
If the sellers instead just closed up shop, they would get maybe a fraction of the money they would from selling it, mainly in selling off assets… It would be a pittance compared to this scheme.
How would the sellers get more money from this scheme? Isn’t liquidating company assets are basically what the buyers (the private equity firms) did anyway?
collect whatever they can from insurance
How does the insurance companies keep falling for these? This has happened several times, and insurance companies aren’t known for being charitable.
It keeps working because the insurance/bank systems are evaluating things on the merit of the lender and their business plan. Anyone can make a decent business plan that will pass muster if you fiddle with it long enough. And the individual company/organisation that is defaulting on these are a dime-a-dozen. Since the failure of the loan goes down with the ship (and company), even if the borrower’s ask for more money tomorrow, as long as the request is coming from a different company/organization, the banks evaluate based on the organisation that is requesting the loan, not the leadership’s failed previous attempts from other businesses.
Incorporated companies have limited liability from their owners. While the owners operate as agents of the business, ultimately the business itself is liable for their decisions. They don’t bear any responsibility. So their actions are based on what will get them, personally, the most value extracted from the business, not based on what’s good for the long-term success of the company itself.
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.
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.
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.
It also exists in Canada.
I just love private equity
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
Everything they did was to line their pockets and destroy the company and leave creditors holding the bag. They should ban buying with loans, no taking loans against acquired companies for X years. The sale and leasing of assets back by the same owners stinks.
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.
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
It’s interesting because almost every single one of the Kmarts in my area disappeared right about the same time, and it was about the same time they started building a lot of luxury condos. Once companies realized that they would make a lot more money off of the luxury condo build and those areas were zoned for both residential and commercial they went ahead and acquired the lots tore down the buildings and now almost every single one of them is a luxury condo. There’s only one exception and I think it’s because the state had to take control of it because they rebuilt the highway that was right next to it and increase the off-ramp and on-ramp area and rebuild the road to basically cut across where the parking lot used to be.
Yes
