Toys ‘R’ Us cheats employees

Big American corporations need to stop front-loading debt onto the businesses they buy.

Toys “R” Us has filed for Chapter 11 bankruptcy and has announced that it will permanently close its doors worldwide with huge liquidation sales this month.

It will also lay off 31,000 employees.

The reason for filing for bankruptcy was not because Walmart and Amazon have taken over the toy industry, but because its parent companies, Bain Capital, Veralto Realty Trust and KKR & Co., loaded the company with debt in 2005.

Those three companies acquired Toys “R” Us in 2005, planning to extract what they could from the toy company and let the top investors cash out years later.

Toys “R” Us’ debt jumped from $109 million in January 2005 to $5 billion in January 2006 due to loans the three companies had pulled after taking the company to private trading. It had since dropped, but still carried a minimum debt of $4 billion until the announcement of the closures in January 2018.

Toys “R” Us is not the only company to be affected in this way with massive amounts of debt.

Last year was deemed “Retail Apocalypse,” according to Other victims were that Kohl’s, Macy’s and Nordstrom, each of which is currently loaded with over $30 billion in debt. J.C. Penney sits at just over $46 billion. Collectively the four retailers, along with other companies in growing debt, closed just over 6,700 stores across the United States.

While Toys “R” Us’ parent companies are using bankruptcy laws to lay off 31,000 employees without any sort of severance packages, its top 17 executives got $16 million in bonuses, in addition to the $8.2 million in retention bonuses just prior to filing bankruptcy, according to the bankruptcy court filings.

The fact that Toys “R” Us refuses to give severance pay to employees, but is willing to give multi-million dollar bonuses to its top executives is ridiculous. What makes this worse was that Toys “R” Us’ bankruptcy was completely avoidable.

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