Amazon didn't kill Toys 'R' Us. Here's what did

[PatrickforO]

This discussion thread was locked as off-topic by DonViejo (a host of the Latest Breaking News forum).

Source: CNN Money

The company's biggest problem: It was saddled with billions of dollars in debt. That debt stopped it from making the necessary investment in stores. And that meant an unpleasant shopping experience that doomed the chain. The company told employees Wednesday that it would close or sell its US stores after 70 years in business.

Toys "R" Us' debt problems date back to well before Amazon (AMZN) was a major threat. Its debt was downgraded to junk bond status in January of 2005, at a time when Amazon's sales were just 4% of their current level.

A year later the company was taken private by KKR, Bain Capital and real estate firm Vornado. The $6.6 billion purchase left it with $5.3 billion in debt secured by its assets and it never really recovered.

The toy store faced several other big challenges at about the same time. There was the rise of big box retailers like Walmart (WMT), which now dwarfs Toys "R" Us in total toy sales. Last year toymakers Mattel (MAT) and Hasbro (HAS) each sold about $1 billion worth of their toys at Walmart, more than twice as much as what they sold through Toys "R" Us. Target (TGT) sold just about as many of their as Toys "R" Us last year.

Read more: http://money.cnn.com/2018/03/15/news/companies/toys-r-us-closing-blame/index.html

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Bain Capital. You remember them?

That's right - Mitt Romney.

Bain is a predatory capital firm that buys companies that are having trouble, saddles them with loans that are impossible to service, then sucks cash from them until they die. Then, when they go belly-up, they lay off thousands of people whose lives are now devastated because a few billionaire freaks saw a chance to turn a quick profit.

Profits over people is not a concept we Democrats should stand for or even tolerate. Profit is fine, but when CEOs make 300 times what their people make, and when it is OK to destroy lives with predatory practices like this, then we need to increase regulation.

Isn't it interesting that banking regulations were just loosened, and with the help of some Democrats. It was a BAD policy move, that. No good will come from it.

In the meantime, wake up, get active with your local Dem party and start choosing good candidates that will act in your best interest, not Mitt's.

[sandensea]

1. A Romney/Paul Singer-style bust-out

St. Ronnie's greatest legacy to future generations of Americans.

[JHB]

4. Oh, that sort of stuff started before Romney. He was a middling player.

This kind of financial game-playing had become clear while still under Poppy Bush.

I've started to wonder just how much of the ire about NAFTA is actually due to the sort of tax laws and lack of regulation that lets that sort of "grab the controls and suck it dry" takeovers (and attendant closures and job losses) flourish.

[KT2000]

9. private equity firms also buy up

manufacturers, move the jobs overseas and count them as American companies because the PE firm is in the US.

[JHB]

11. ...and have since Reagan.

[KT2000]

16. yes - it has been going on

for a long time. I do believe they accelerated when they saw others making a killing and when China opened up to be America's manufacturer.

[JHB]

17. See my post below, #12. Note the date on the series mentioned...

...which was the dawn of opening up China.

[dbackjon]

19. Yup - a PE firm bought Aladdin (Thermos bottles etc) in 2002

And promptly closed the Nashville operations and shipped it overseas.

Not that Aladdin wasn't profitable, just not "profitable enough"

[JHB]

22. I believe the preferred phrase is "under-performing"...

..which translates into the real world as "not sending as much money skyward as we think it should."

[sandensea]

21. Sure. I'm old enough to remember Eastern Airlines, PanAm, and some of KKR's hijinks.

By St. Ronnie, I meant this clown:



And you're absolutely right about the NAFTA angle. South of the border, their ejecutivos started staging these bust-outs in a big way during the late 1970s foreign debt binge. I don't doubt that during the 1992 negotiations, policies designed to promote these scams were deliberately written in at the request of Mexican bankers.

Vaciamiento de empresa, they call it - literally, hollowing out of a business. Most of the foreign debt crisis in the region during the '80s actually went to pay for these vaciamientos.

[elehhhhna]

14. Bain destroyed Kb toys in the exact same manner.

[JHB]

2. Nailed it!

https://www.democraticunderground.com/?com=view_post&forum=1002&pid=10360511

3. How much debt did Bain and Vornado saddle them with?

There was a leveraged buyout in 2005, and it’s always worth checking up on just how much debt the money guys shuffled onto the company’s books while they pay themselves back.

[Angry Dragon]

3. Romney the Vulture

[JHB]

6. "A" vulture, note "the" vulture.

He's had plenty of company, and he's not one of the biggest.

[Crash2Parties]

23. Romney the Grinch!

[dixiegrrrrl]

18. Wonder how much was in the pension fund....

Vornado, btw, is the company that bought half of Kushner's 666 building.
And now is talking about selling it. But Kushner has no money to buy that half back.

[RandomAccess]

5. As soon as I saw the headline this morning, I immediately

wondered if Bain had been allowed anywhere around it, ever.

Bain also did that to KBR Toys, and God knows who else.

Vultures and Parasites.

[JHB]

7. Like the Koch brothers, Bain is important but don't fixate on them...

...there's plenty more players at work, even more so in this area than in the Koch's case.

[BumRushDaShow]

8. And look at what OTHER Bain vulture buy just went bankrupt this week too

https://www.democraticunderground.com/10142014087

iHeartMedia Files for Bankruptcy
March 14, 2018 11:16PM PT

iHeartMedia, the debt-burdened radio conglomerate, bowed to the inevitable late on Wednesday (March 14) and filed for Chapter 11 bankruptcy protection. In a statement, the company said it had reached an agreement with the holders of more than $10 billion of its debt.

“The agreement we announced today is a significant accomplishment, as it allows us to definitively address the more than $20 billion in debt that has burdened our capital structure,” CEO Bob Pittman said in a statement. “Achieving a capital structure that finally matches our impressive operating business will further enhance iHeartMedia’s position as America’s #1 audio company.”

iHeart, formerly known as Clear Channel, is the nation’s largest radio company, with more than 850 stations. It also owns iHeartRadio’s music streaming service, a large concert business, and a 90% stake in Clear Channel Outdoor, the billboard company. Clear Channel Outdoor did not file for bankruptcy. For years, the company has been saddled with $20 billion in debt, the legacy of a leveraged buyout in 2008.

<...>

The company, owned by Thomas H. Lee Partners and Bain Capital, has been in negotiations for nearly a year with its primary debtholders, led by Franklin Resources Group. Under the agreement detailed in an SEC filing, the debtholders will take control of more than 91 percent of the equity in the reorganized company, while Bain and Thomas H. Lee will keep just 1 percent. In term sheets released previously, the equity holders had offered creditors 89.5 percent of the equity, and proposed to keep 5.25 percent of the company. The creditors’ counteroffer sought a higher stake in the company — 94.75 percent — while offering the equity holders nothing.

<...>

http://variety.com/2018/biz/news/iheartmedia-chapter-11-bankruptcy-1202715566/

[paleotn]

10. words from the not so distant past....

vampire capitalism.

[JHB]

12. This seems like a good time to repost this from last September...

Something I'd posted when TRU first filed for bankruptcy.

The Philadelphia Inquirer series of articles mention was from 1991. During G. H. W. "Poppy" Bush's presidency. It's been going on that long.

https://www.democraticunderground.com/?com=view_post&forum=1014&pid=1869250

Exactly. Headline should read "...crushed by management financial games"

I'd love to see a study about how much job and wage loss that is written off as due to automation and offshoring has actually been due to (or triggered by) financial games by the people in control of the companies.


When this sort of thing comes up it's always instructive to break out the 1991 Philadelphia Inquirer series by Bartlett and Steele:
http://www.philly.com/philly/opinion/inq_HT_WhatWentWrong1991.html

DAY 1
How game was rigged against middle class

After three decades, American worker loses out to Mexico
Who - and how many - in America's middle class

DAY 2
The lucrative business of bankruptcy

DAY 3
Big business hits the jackpot with billions in tax breaks

DAY 4
Why the world is closing in on the U.S. economy

DAY 5
The high cost of deregulation: Joblessness, bankruptcy, debt

DAY 6
For millions in U.S., a harsh reality: It's not safe to get sick

How death came to a once-prosperous discount-store chain

DAY 7
Raiders work their wizardry on an all-American company

DAY 8
When you retire, will there be a pension waiting?

Workers saving for their retirement lose on junk bonds

DAY 9
How special-interest groups have their way with Congress

America's two-class tax system

[Politicub]

13. When private equity comes in

bankruptcy and layoffs are soon to follow.

After the vultures at the private equity firm case their checks, of course.

[Igel]

15. So it's a series of things.

3. Amazon and online retailers kept it from recovering.

2. Bain bought it out and it couldn't handle the debt that resulted.

1. But before that it was already floundering and its stocks reduced to junk status.

The only reason to miss the first cause, the one that put it in trouble and would have killed it, was to focus on (2). The "predatory" companies are often more like predators that bring down the sick and wounded or scavenge among the dying and dead. In some cases they help the company and make money; in other cases, the profit comes from dismembering the remains after keeping the thing on life support.

If not for that company, it's likely we'd have been talking about Toys 'R' Us' demise when DU was perhaps 3, 4 years old.

[PatrickforO]

20. LOL. Ah but I'm a democratic socialist and despise capitalism, particularly

this predatory kind.

I can readily appreciate your analogy making a company like Bain seem like a predator culling the herd of the sick and wounded.

Indeed, that almost legitimizes it.

Almost.

Kudos to you for a thoughtful challenge, but in my mind your analogy may easily approach social Darwinism, and I most emphatically do not believe in that.

[DonViejo]

24. Locking....

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