Economy

Debt “R” Us: Corporate Takeover Kills 33,000 Jobs

The Toys “R” Us mascot—Geoffrey the Giraffe—is streaming tears down his long neck.

A Sad “Toy Story.” Once the nation’s leading toy retailer, Toys “R” Us has remained profitable, selling one of every five toys purchased in the U.S. last year.

  • The superstore brought in $460 million in operating income before making its debt payments.

 

  • But now, it’s filing for bankruptcy, closing its 730 U.S. stores, and laying off 33,000 American workers.

 

  • Parents and kids are asking: Why?

Buying the Company with Its Own Money. Don’t believe the easy explanations—that Amazon and online commerce are solely responsible for bankrupting this iconic company.

  • The real culprits are the corporate-takeover specialists, including Bain Capital (co-founded by former Republican presidential candidate Mitt Romney), which bought Toys “R” Us for $6.6 billion in 2005.

 

  • In an all-too-typical Wall Street maneuver, these investors bought the toy store with its own money. Bain and its partners paid only 20 percent of the cost out of their own pockets. They borrowed the rest, sticking Toys “R” Us with more than $6 billion in debt.

 

  • In short, “Toys R Us” went bankrupt because it had to fork over $450 to $500 million a year in interest payments, eating up its earnings as a successful retailer.

Categories: Economy, Jobs