Toys ‘R’ Us Bankruptcy: Another Wall Street Debt Slave Falls

by Pam Martens and Russ Martens , wallstreetonparade:

The year 2017 is likely to be remembered for devastating hurricanes and storm surges, waves of retail bankruptcies amidst record-setting household debt and a stock market that carelessly sailed through these dangerous waters to record highs.

Toys ‘R’ Us was the latest in a growing string of retail bankruptcies to hit the mat last evening. Its bonds have been telegraphing trouble for some time, with one bond due next year careening from 97 cents on the dollar to 22 cents in a little more than two weeks. On September 6, Wolf Richter at WolfStreet.com provided the short narrative of how Toys ‘R’ Us found itself driving toward the ditch. Citing its leveraged buyout in 2005 by private equity firms Bain Capital, KKR & Co. and real estate firm Vornado Realty Trust, Richter wrote:

“So here’s what the three PE firms did to Toys R Us: they stripped out cash and loaded the company up with debt. And these are the results: At the end of its fiscal year 2004, the last full year before the buyout, Toys R Us had $2.2 billion in cash, cash equivalents, and short-term investments. By Q1 2017, this had collapsed to just $301 million. Over the same period, long-term debt has surged 126%, from $2.3 billion to $5.2 billion…It takes a lot of expertise and Wall Street connivance to pull this off.”

If the name, Bain Capital, sounds familiar to you, it’s because it’s the private equity firm that was co-founded by Mitt Romney in 1984 and overseen by him in the 80s and 90s. In his book, Turnaround, Romney writes that he owned 100 percent of the shares of Bain Capital. Romney went on to become the Republican Party’s nominee for President in 2012 and his varnished version of just what Bain Capital did for a living came under close scrutiny.

In 2012, Matt Taibbi of Rolling Stone penned an in-depth report on the dubious history of Bain Capital in the demise of companies. Taibbi wrote:

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