Toys R US looking at bankruptcy filing

[Michchamp]

those private equity firms kept Toys R Us alive for another 13 years and counting. Toys R Us was not a "mildly profitable company". It was a completely bankrupt company that was on the verge of being completely shut down sometime in 2004. At the time, most thought it was going to be shut down and its massive real estate holding were going to be thrown into a REIT (that was all the rage among the event driven investment community before reverse mergers became the hot new thing).

Toys R Us was a horribly flawed business model that wasn't going to survive the shift in commerce that was transforming huge parts of the economy. It used to be that they could operate at a loss for 11 months and then turn a profit off of Christmas sales in December. But along came WalMart who could have 1 toy aisle in a massive store for 10.5 months then triple or quadruple floor space for toys at Christmas time and sell toys for WAY less than Toys R Us could. Then along came the internet and pummeled Toys R Us even further.

Toys R Us is not a victim of piracy, it's an antiquated business model that can't compete and if not for the private equity buyout, those workers would have been out of work 13 years ago, so maybe instead of condeming them, they and people like you should be thanking them for the jobs they wouldn't have had without them. Or at least just shut the hell up about things they don't understand.

According to Bloomberg, my understanding of this (and private equity's role in the bankruptcy) is correct, and yours is complete and utter bullshit, as per usual.

One thing to say about Toys "R" Us Inc.'s bankruptcy filing yesterday is that Toys "R" Us's business is basically fine. It had $460 million of GAAP operating income last year, up from the year before; its adjusted earnings before interest, taxes, depreciation and amortization -- the company's preferred metric -- was $792 million. Like all retailers, Toys "R" Us faces a tough environment and competition from Amazon and Wal-Mart, but that's not what brought it to bankruptcy.

Instead, Toys "R" Us's problems are "the legacy of a $7.5 billion leveraged buyout in 2005 in which Bain Capital, KKR & Co. and Vornado Realty Trust loaded the company with debt to take it private." It currently "has more than $5 billion in debt, which it pays around $400 million a year to service." "If they didn?t have the debt they would be making $500 to $600 million a year in profit," said one analyst. "The problem is the debt."​

Link.

the cost to service the debt is nearly as high as their operating income! how fucking greedy can these guys be? fuck! still you'll hear endless talking heads on business TV attributing this to Amazon...

but I guess you still think that $7.5 BILLION in debt the banks pocketed was due to those selfless angels trying to save a struggling company...

"Here let me help you. take out a huge fucking loan, as much as they'll loan you, then pay ME the proceeds (ALL of them), then pay off the debt yourself. I just saved your company. You should thank me."

 

[Michchamp]

the fact that you shamelessly defend this practice is fucking gross. expropriating the profit of a company that employs 64,000 people across the country, all so a handful of pricks can add guest houses or second pools to their places in the Hamptons.

let's be honest, if the government took steps to make LBOs unprofitable, by law and/or by tweaking the tax code, these guys would be in jail for running ponzi schemes or something, that's the type of people they are.

 

[tomdalton22]

According to Bloomberg, my understanding of this (and private equity's role in the bankruptcy) is correct, and yours is complete and utter bullshit, as per usual.

One thing to say about Toys "R" Us Inc.'s bankruptcy filing yesterday is that Toys "R" Us's business is basically fine. It had $460 million of GAAP operating income last year, up from the year before; its adjusted earnings before interest, taxes, depreciation and amortization -- the company's preferred metric -- was $792 million. Like all retailers, Toys "R" Us faces a tough environment and competition from Amazon and Wal-Mart, but that's not what brought it to bankruptcy.

Instead, Toys "R" Us's problems are "the legacy of a $7.5 billion leveraged buyout in 2005 in which Bain Capital, KKR & Co. and Vornado Realty Trust loaded the company with debt to take it private." It currently "has more than $5 billion in debt, which it pays around $400 million a year to service." "If they didn?t have the debt they would be making $500 to $600 million a year in profit," said one analyst. "The problem is the debt."​

Link.

the cost to service the debt is nearly as high as their operating income! how fucking greedy can these guys be? fuck! still you'll hear endless talking heads on business TV attributing this to Amazon...

but I guess you still think that $7.5 BILLION in debt the banks pocketed was due to those selfless angels trying to save a struggling company...

"Here let me help you. take out a huge fucking loan, as much as they'll loan you, then pay ME the proceeds (ALL of them), then pay off the debt yourself. I just saved your company. You should thank me."

what banks pocked $7.5B in debt?

I also found this line funny - "If they didn?t have the debt they would be making $500 to $600 million a year in profit," said one analyst. "The problem is the debt."

well no shit! I'm sure there are thousands of businesses across the country that would be profitable if they didn't have to service their debts. What an analyst!

 

[Michchamp]

what banks pocked $7.5B in debt?

I also found this line funny - "If they didn?t have the debt they would be making $500 to $600 million a year in profit," said one analyst. "The problem is the debt."

well no shit! I'm sure there are thousands of businesses across the country that would be profitable if they didn't have to service their debts. What an analyst!

sigh...

they wouldn't have the debt if it wasn't for a handful of banks taking them private (ie buying up all their stock) and forcing Toys R Us to take out the loans to pay them back, and pay them a huge "dividend" on top of that for their trouble.

do you understand now? Toys R Us would be fine, both now and 10 years ago, had these guys not decided it was an "investment opportunity" for them.

I'm not just saying "liberal crap" here... this is what goes on in LBOs. read up on it for yourself if you don't believe me.

 

[Michchamp]

further case in point: this is only a chapter 11 reorganization, not a chapter 7 liquidation.

toys r us will continue to operate, with these debts wiped out.

Good on Dave Brandon if he forced this, contrary to the banks wishes.

 

[Michchamp]

sounds like there is hope for Dave Brandon...

selling consumers crap (mass produced pizza, toys, etc) is more in his wheelhouse, not running an athletic department like Michigan.

for what it's worth... taking kids to Toys R Us and letting them pick something out once and a while is a fun experience, and I'm not trashing that, or a company making a profit; both things are good. yay for profits, boo for private equity and leveraged buyouts that consolidate those profits for a handful of sleazy "bankers" like Mitt Romney.

 

[tomdalton22]

sigh...

they wouldn't have the debt if it wasn't for a handful of banks taking them private (ie buying up all their stock) and forcing Toys R Us to take out the loans to pay them back, and pay them a huge "dividend" on top of that for their trouble.

do you understand now? Toys R Us would be fine, both now and 10 years ago, had these guys not decided it was an "investment opportunity" for them.

I'm not just saying "liberal crap" here... this is what goes on in LBOs. read up on it for yourself if you don't believe me.

so, the company was in great financial shape, with no debt, prior to the takeover!

I also found this interesting

Toys "R" Us has secured $3.1 billion in debtor-in-possession financing and will try to use the bankruptcy process to reorganize its capital structure so it can try to compete with the likes of Amazon. Still, the bankruptcy process will impose more fees on Toys "R" Us, from the likes of Kirkland & Ellis, whose lawyers charge upwards of $1,000 an hour. The same firm advised Bain Capital when it purchased its stake in the Toys "R" Us leveraged buyout in 2005. In his filing, Toys "R" Us CEO Brandon estimates that based on his conversations with investment bank Lazard, there will be $96.5 million in fees just to procure the debtor-in-possession financing

fucking blood sucking lawyers!

 

[Michchamp]

so, the company was in great financial shape, with no debt, prior to the takeover!

I also found this interesting

Toys "R" Us has secured $3.1 billion in debtor-in-possession financing and will try to use the bankruptcy process to reorganize its capital structure so it can try to compete with the likes of Amazon. Still, the bankruptcy process will impose more fees on Toys "R" Us, from the likes of Kirkland & Ellis, whose lawyers charge upwards of $1,000 an hour. The same firm advised Bain Capital when it purchased its stake in the Toys "R" Us leveraged buyout in 2005. In his filing, Toys "R" Us CEO Brandon estimates that based on his conversations with investment bank Lazard, there will be $96.5 million in fees just to procure the debtor-in-possession financing

fucking blood sucking lawyers!

Oh man, don't get me started on THOSE guys...

I do think that we blood sucking lawyers need to think bigger though... a few million dollars in legal fees to file bankruptcy is <<<<<<<<<<<< less than the $7.5 BILLION in loans payable to the banks that landed them where they are now.

 

[TheVictors]

Speaking on behalf of Investment Bankers, the fees we charge for working such 'transactions' are typically mainly legal fees. At my firm - we're not IB - our legal department is, by headcount, one of the largest now. Our CEO always makes cracks because when we were a smaller, private company, we had like 3 attorneys and now there are around 20, with full paralegal and support staff.

 

[Michlady]

Even I chapter 11 they still have to deal with Amazon

 

[TheVictors]

I'm not as emotionally invested in this subject as some seem to be, but Spartanmack is right about the big picture and Toys R Us having been put on life support for over a decade. WalMart and Amazon ..Target as well, have all run circles around that outdated business model and while the LBO has now exacerbated things, the company simply failed to adapt and change.

As for WalMart, my lovely Mother-in-Law recently retired - fully vested - from the company. She was in an office job ...had her pay cut repeatedly in recent years ...was re-assigned at her near retirement age, to work the floor as a 'stock boy' and effectively pushed out. But she wouldn't quit until she would be fully vested and had a countdown beginning at 364 days. New hires brought in were being paid a percentage of her earned wage and had vastly different benefits than she had. Her sister, my wife's aunt, also worked for the company in PA. She had a similar experience. Older, better paid workers were being covertly forced out and replaced by younger, far worse paid/benefits employees.

We don't give WalMart our money, shopping elsewhere. Sort of sad about Toys R Us ...end of an era and all, but the few times I've been in one of their stores as a Dad the past decade, you could see the writing on the wall.

 

[Michchamp]

I'm not as emotionally invested in this subject as some seem to be, but Spartanmack is right about the big picture and Toys R Us having been put on life support for over a decade. WalMart and Amazon ..Target as well, have all run circles around that outdated business model and while the LBO has now exacerbated things, the company simply failed to adapt and change.

As for WalMart, my lovely Mother-in-Law recently retired - fully vested - from the company. She was in an office job ...had her pay cut repeatedly in recent years ...was re-assigned at her near retirement age, to work the floor as a 'stock boy' and effectively pushed out. But she wouldn't quit until she would be fully vested and had a countdown beginning at 364 days. New hires brought in were being paid a percentage of her earned wage and had vastly different benefits than she had. Her sister, my wife's aunt, also worked for the company in PA. She had a similar experience. Older, better paid workers were being covertly forced out and replaced by younger, far worse paid/benefits employees.

We don't give WalMart our money, shopping elsewhere. Sort of sad about Toys R Us ...end of an era and all, but the few times I've been in one of their stores as a Dad the past decade, you could see the writing on the wall.

um, three things:

1) while I know you have access to financial data the public (and I ) doesn't, according to the bloomberg article I posted, Toys r Us is "basically fine" and it sounds like they would be profitable, BUT FOR the cost of servicing the debt foisted on them by Mitt Romney's gang.

and not only that, but it seems a little unlikely that if Toys R Us was a failing concern as far back as 2005, they would've been targeted by Mitt & Co, OR been credit-worthy enough to take out the billions in loans Mitt & Co helped themselves to at the time.

2) I had read articles about how Toys r Us/Babies R Us were outdated and dying (because of course that narrative benefits Mitt & Co's position)... and I hadn't set foot in one for probably close to 20 years until I had kids in the 2010's. I was surprised by the amount of foot traffic and shoppers in both formats. anecdotal, I get it, but certainly surprising given what I had read about the company, and retail in general.

3) Hope your MIL is a Bernie Sanders supporter after that! glad she was able to get her pension... hope she fully enjoys it and doesn't get screwed out of it by Mitt and Co... the have their eyes on social security in general, pension funds, retirements, etc. all big wads of cash just sitting their for the taking...

 

[TheVictors]

She liked Bernie but voted Hillary, I'm sure.

Some of the PA family went Trump under premise of 'creating jobs' - blue collar, coal mine type area. Most now regret their vote but it caused tension in the otherwise typically Blue family.

As for TRUs, from an investment perspective, the narrative was that other retailers were far better and growing and they weren't. I didn't read the article you linked but have read analysts and others views and was going from that.

I will read it at Sky Harbor before climbing in to my 1st class seat because, I'm a millionaire, you know.

 

[tinselwolverine]

The problem with Toys R Us is they were too slow to get into the sale of firearms, the way WalMart did.

 

[GoBlueInAtlanta]

The problem with Toys R Us is they were too slow to get into the sale of firearms, the way WalMart did.

 

[Michchamp]

The problem with Toys R Us is they were too slow to get into the sale of firearms, the way WalMart did.

to be fair, everyone is behind Walmart there. they're the only company with the BALLS to market directly to school shooters. (Hey Sam Walton's heirs gotta eat too)

 

[tomdalton22]

to be fair, everyone is behind Walmart there. they're the only company with the BALLS to market directly to school shooters. (Hey Sam Walton's heirs gotta eat too)

that's too funny. My guess is some customer put the sign there as a joke.

 

[Michchamp]

that's too funny. My guess is some customer put the sign there as a joke.

my guess is it's some smartass employee who had already given his 2 week notice