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.
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.
It is insane. You’re not crazy, or at least if you are we can be crazy together because I also think the whole thing is rotten to the core.
It’s pretty disgusting what the borgeousie get up to and away with. The whole world is broken. How we have decided society is going to work and run is all one big collective illusion anyways; we might as well make the mirage nicer for the majority of us humans instead of scrabbling like crabs climbing over one another to get to the top.
Anyways, I think part of the problem is once you see the illusion there isn’t much of anything to do about it as an individual because there’s so much going on out of your control.
I think that’s a big part of why we’re seeing more anxiety and depression than ever - because we know how we live (particularly in the west but really almost everywhere) is not sustainable, destroys the environment and causes suffering on a global scale but we keep dutifully existing quietly in the system as the cogs we are.
I like all the stuff I have, I like my car and house and standard of living but I don’t know if it would be feasible for the whole world to live like me and I’m not even rich or that well off. That’s the real crazy part. I have some privilege, I know I’m at least better off than half of my fellow Americans … But still I am just a proletariat like every other person working for wages.
Because bankers buy politicians and if people complain they buy news coverage to call the naysayers socialists
Wasn’t it Bain Capital (Mitt Romney’s old place of work), or am I misremembering?
Yes, that was one of them.
From OP