There’s more to the story of the Toys ‘R’ Us bankruptcy than is being reported by the mainstream media. The standard story is that the company simply buckled under its burden of “crushing” debt. But they do not tell us where that debt went to.
Wealth Extraction was the Issue
Leave it to the Keiser Report to explain that the whole debacle was caused by asset stripping carried out by the archenemies of honest capitalism, the PE firms that acquired Toys ‘R' Us in 2005 – KKR (formerly Kohlberg Kravis Roberts), Bain Capital, and Vornado Realty Trust.
Most media outlets blamed either the company’s own debt or the Amazon effect or the retail crisis, avoiding any mention of the fact that Toys ‘R’ Us was solely the victim of wealth extraction.
Bloomberg stated only that “debt was an issue” and that Toys ‘R’ Us “drowned in their own debt.” Reuters simply stated that those PE firms “took (the company) private in 2005,” adding that the firms “all supported the company filing for bankruptcy.” Neither news outlet bothered to look into why the company had taken on the crushing debt, nor where the money went to. (hint: Those PE firms "supported the bankruptcy.")
Even the New Yorker sidestepped the issue of the asset stripping, stating only that the company had succumbed to “its nasty debt problem.” However, it did note that another of Bain’s targets had suffered a similar fate, when “KB Toys, which Bain took over in 2000 … filed for bankruptcy protection twice, and closed in 2009.”
Firms “Did a Runner” – Standard PE Business Model
But as Max Keiser and Stacy Herbert pointed out, Toys ‘R’ Us was hollowed out by the PE firms, which “loaded the company up with debt,” “stripped the cash from the company,” and then “did a runner.”
Such devious tactics are to be expected. They’re all part of the standard business model of the PE / leveraged buyout scam.
As per Bloomberg, the remaining stakeholders are “fighting for residual value of what’s left.” Of course, the PE robber barons won’t be involved in the fight for the scraps, since they already took out their massive dividends and “did a runner.”
(Further Viewing) – Keiser Report on Leveraged Buyout (aka Pillaging) of Toys ‘R’ Us
