Here is how it worked: Bain Capital decides to acquire Toys-R-Us so they set-up NewToyCo and invest $5B in it. NewToyCo buys Toys-R-Us with that $5B and insta

Here is how it worked: Bain Capital decides to acquire Toys-R-Us so they set-up NewToyCo and invest $5B in it. NewToyCo buys Toys-R-Us with that $5B and installs new managers at Toys-R-Us. Since the invested cash was investment and not a loan, NewToyCo owns Toys-R-Us free and clear The new managers of Toys-R-Us get a $5B loan from banks secured by the assets of Toys-R-Us and pay a one time $5B dividend to shareholders of NewToyCo. If everything goes well and Toys-R-Us can service the loan, Bain owns Toys-R-Us for free and sells it or takes it public. If things don't work out, they collected huge management consulting fees for s few years. Bain ran this exact same play on KB Toys with the same (bankruptcy) result.