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This is the opposite of correct. Toys R Us core business is profitable and throws off 200 million in profits a year. The reason they went bankrupt is that a pr
by L_Rahman 9y ago
This is the opposite of correct. Toys R Us core business is profitable and throws off 200 million in profits a year.
The reason they went bankrupt is that a private equity company bought them in an LBO and the debt load became unserviceable.
- jsight 9y agoIf this is true, then why are they closing the stores?
- smacktoward 9y agoBecause with $5 billion in debt, even if they devoted 100% of that $200 million/year profit to paying off the debt, it'd take 25 years for them to pay it all back -- and that's assuming the debt isn't accruing any interest over all that time. Which is why the parent called the debt load unserviceable.
- MarkMc 9y agoOK so the debt load became unserviceable and the company went bankrupt. But why doesn't the administrator keep the stores running? The creditors would get an asset worth $200 million per year which is better than nothing
- jsight 9y agoThat still doesn't really make sense. A bankruptcy reorganization would make more sense than a complete shutdown, if the stores themselves were really profitable.
- beaconstudios 9y agohere's what I don't understand - if the equity firm took out a huge loan to buy Toys R Us, how come it's Toys R Us that's going bankrupt? Did they transfer the debt to Toys R Us? I don't understand M&A at all but that seems backwards.