Monday, July 9, 2018

"Congress confronts Bain Capital, KKR over Toys R Us liquidation"

From Pitchbook:

The Toys R Us bankruptcy has suddenly become political.
After creditors recently liquidated the company's US operations, 19 members of Congress, including former presidential candidate Bernie Sanders, sent Toys R Us' former private equity backers a letter demanding answers about their business practices and bashing the PE industry's business model, per The Wall Street Journal.

"Leveraged buyouts … often result in mass job loss, closure of profitable businesses and unnecessary financial burdens for local government," the letter read. "Such buyouts harm communities, while investment managers walk away with significant gains."

Bain Capital, KKR and Vornado Realty Trust took Toys R Us private for $6.6 billion in 2005, loading the company with a reported $5 billion in debt. The business ultimately filed for Chapter 11 bankruptcy in September, despite a reported $150 million in annual operating profit (not factoring in the debt payments). Creditors eventually took control, opting to shut down all US stores while some 33,000 workers lost their jobs and were denied $75 million in combined severance.

Bain Capital and KKR have maintained they wanted Toys R Us to emerge from the bankruptcy rather than liquidate. The lawmakers' letter expressed doubt about that sentiment.

"We are concerned that your investment firms have deliberately chosen this path for the company, its workers and its communities," the letter continued. "It is still possible, of course, to assure some measure of recognition for workers and their service, through severance pay and community-impact funds, for example."

The investment group has said it invested a total of $3.5 billion back into Toys R Us during its ownership tenure, but the rise of Amazon and other online retailers ultimately crippled the business. In the meantime, the investors pulled in some $470 million in management fees and interest payments, though the group claims it did not make a profit....MORE

Also at Pitchbook and preceding the above:
Opinion: Bain Capital, KKR should pay up for Toys R Us letdown

"How Vulture Capitalists Ate Toys 'R' Us"

Another Private Equity-Backed Company Files For Bankruptcy Protection: This Time it's Remington Outdoor (né Arms)

And a big one ($20 billion total debt): "Largest Radio Station Owner, iHeart Media (finally) Files For Bankruptcy Protection (iHRT)