7 ms·

limited downsides It's worth noting that the PE firms involved in the deal lost over a billion dollars on their investment in this case.

by harryh 9y ago

kelleoeo 9y ago
Rich people losing a fraction of their wealth and who will rebound thanks to business networking effects, and be given a pass because sometimes that’s how it goes Limited downside seems accurate
- jerf 9y ago
  OK, what are you looking for? Rich people get one shot at doing something, and if they fail, the government comes riding in and takes all their stuff? You have to be careful when you get vindictive at rich people; they're also the employers, and it's hard to build a system where such people aren't "the rich". (If you hard-core leveled everyone in the world to equal wealth, nobody would be able to employ anybody else in the current sense of the term. People would have to pool their money and give it to somebody or set of somebodies to manage. And lo, watch "the rich" appear again as the people who successfully employ others get a return, and those who fail do not. It's really hard to avoid "the rich" also being "the employers".) I can pretty much guarantee someone, probably multiple someones, were called on the carpet at these firms, and did not get the "Oh well, just try again good buddy!" treatment.
  - chongli 9y ago
    OK, what are you looking for? Rich people get one shot at doing something, and if they fail, the government comes riding in and takes all their stuff? I can't speak for the person you replied to, but how about this? Less downside for the workers. We're talking about thousands of people losing their jobs. These people then go into a smaller labour market where they compete with other vulnerable retail workers, affecting far more people. If we want an appropriate measure of downside in a situation like this, we should look at all of the externalities. Few people ever do, though, and society marches on.
    - harryh 9y ago
      Poorly performing companies going out of business in order for new, better companies to flourish is a necessary step for the creation of a healthy job market.
      - chongli 9y ago
        I don't see it. Working at Toys R Us may not have been great, fine, but it sure beats pissing in bottles in a sweltering/freezing Amazon warehouse. Amazon is a lot more profitable than Toys R Us ever was but that doesn't mean they make the job market, let alone society, healthier.
        harryh 9y ago
        I bet you spend more money at Amazon than you did at Toys R Us. You might not see it, but your wallet does.
        chongli 9y ago
        Yes, and I can complain about sweatshops in India and Bangladesh without foregoing clothes. Appeals to hypocrisy are the weakest sort of argument.
        harryh 9y ago
        It was not intended an appeal to hypocrisy. It was demonstrating that a lot of people (including you and me) get a tremendous amount of value out of Amazon and society is healthier as a result.
      - smcl 9y ago
        It probably feels very good to type a comment like that while imagining some invisible force gently guiding these newly unemployed people to their new careers. However in reality thousands of people have now lost their income and likely their health insurance, and will have to compete in what in many places is a pretty brutal and not at all healthy job market. It sucks, and there’s nothing you or I can do about it ... but pretending that this is actually a good thing for anyone but a handful of rich guys who will have made out like bandits on the whole debacle is just fantasy.
  - kelleoeo 9y ago
    I want you and everyone else to stop kowtowing to blatant nonsense and “daddy”. Physics and economics are not one and the same. Ownership is not divine and should be treated as such. Paulo Freire and others are better at explaining the reality. This forum is a wasteland of neoliberal babies who want to build a giant castle to their egos and live in it. Grow up a bit. Be less ignorant of history and stop fetishizing economic output. If we have to motivate the species so hard to produce, perhaps economy is inherent to our biology. But next quarter growth or bust! Clueless rubes
metabagel 9y ago
We don't actually know how it worked out for them, because reportedly they spent twelve years siphoning off cash from Toys 'R' Us.
- harryh 9y ago
  We do know actually: https://www.bloomberg.com/news/articles/2017-09-19/bain-kkr-vornado-suffer-wipeout-in-toys-r-us-bankruptcy https://www.bloomberg.com/news/articles/2017-09-19/bain-kkr-...
  - metabagel 9y ago
    Marketplace says that Bain and KKR still made money off of the deal. https://www.marketplace.org/2018/03/06/business/toys-r-us-and-how-retail-downturn-story-about-debt https://www.marketplace.org/2018/03/06/business/toys-r-us-an... "The private equity firms’ investors haven’t made money off this deal. But the firms themselves have. It’s unclear where Vornado ended up. But after collecting fees from Toys R Us, Bain and KKR each took home at least $15 million."
    - harryh 9y ago
      That says they earned revenue, not a profit. They did not earn a profit.
bhouston 9y ago
According to my calculations in this comment they are at least close to net zero: https://news.ycombinator.com/item?id=16906549 https://news.ycombinator.com/item?id=16906549 Which is pretty good outcome for them given TRU has failed completely.
- JumpCrisscross 9y ago
  You overestimate interest and fees, paid by Toys 'R' Us to the PE firms, by over 100%. We know the actual numbers from SEC and bankruptcy filings [1]. [1] https://www.bloomberg.com/news/articles/2017-09-19/bain-kkr-vornado-suffer-wipeout-in-toys-r-us-bankruptcy https://www.bloomberg.com/news/articles/2017-09-19/bain-kkr-...
  - bhouston 9y ago
    So either the interest amount of $435M per year (which is roughly 15% interest on 6.6B) is incorrect from the original article or they receives less than 20% of that interest? Strange. $270M over 13 years from $1.1B in loans? ($270M = $470M - the $200M in fees.) That seems incredibly low interest. I am suspicious. LBO firms do not give low interest loans to their targets. If we assume an interest rate of 5%, you get 50M in interest a year on 1B. 13 years will yeild $750M in interest. Did these LBO firms really offer loads at something like 1.5%? Something isn't adding up.
    - JumpCrisscross 9y ago
      > they receives less than 20% of that interest? They hold less than 20% of the debt. Most of their investment went in as equity. That's wiped out. > LBO firms do not give low interest loans to their targets PE buys equity and subordinated debt. Sub debt has high rates and wonky structures. In this case, I believe it was pay in kind, "a type of high-risk loan or bond that allows borrowers to pay interest with additional debt rather than cash" [1]. Nice feature if the debt is repaid. Less fun when it's wiped out. [1] https://en.wikipedia.org/wiki/PIK_loan https://en.wikipedia.org/wiki/PIK_loan

limited downsides It's worth noting that the PE firms involved in the deal lost over a billion dollars on their investment in this case.

by harryh 9y ago

limited downsides It's worth noting that the PE firms involved in the deal lost over a billion dollars on their investment in this case.

kelleoeo 9y ago

Rich people losing a fraction of their wealth and who will rebound thanks to business networking effects, and be given a pass because sometimes that’s how it goes Limited downside seems accurate

jerf 9y ago
OK, what are you looking for? Rich people get one shot at doing something, and if they fail, the government comes riding in and takes all their stuff? You have to be careful when you get vindictive at rich people; they're also the employers, and it's hard to build a system where such people aren't "the rich". (If you hard-core leveled everyone in the world to equal wealth, nobody would be able to employ anybody else in the current sense of the term. People would have to pool their money and give it to somebody or set of somebodies to manage. And lo, watch "the rich" appear again as the people who successfully employ others get a return, and those who fail do not. It's really hard to avoid "the rich" also being "the employers".) I can pretty much guarantee someone, probably multiple someones, were called on the carpet at these firms, and did not get the "Oh well, just try again good buddy!" treatment.
- chongli 9y ago
  OK, what are you looking for? Rich people get one shot at doing something, and if they fail, the government comes riding in and takes all their stuff? I can't speak for the person you replied to, but how about this? Less downside for the workers. We're talking about thousands of people losing their jobs. These people then go into a smaller labour market where they compete with other vulnerable retail workers, affecting far more people. If we want an appropriate measure of downside in a situation like this, we should look at all of the externalities. Few people ever do, though, and society marches on.
  - harryh 9y ago
    Poorly performing companies going out of business in order for new, better companies to flourish is a necessary step for the creation of a healthy job market.
    - chongli 9y ago
      I don't see it. Working at Toys R Us may not have been great, fine, but it sure beats pissing in bottles in a sweltering/freezing Amazon warehouse. Amazon is a lot more profitable than Toys R Us ever was but that doesn't mean they make the job market, let alone society, healthier.
      - harryh 9y ago
        I bet you spend more money at Amazon than you did at Toys R Us. You might not see it, but your wallet does.
        chongli 9y ago
        Yes, and I can complain about sweatshops in India and Bangladesh without foregoing clothes. Appeals to hypocrisy are the weakest sort of argument.
        harryh 9y ago
        It was not intended an appeal to hypocrisy. It was demonstrating that a lot of people (including you and me) get a tremendous amount of value out of Amazon and society is healthier as a result.
    - smcl 9y ago
      It probably feels very good to type a comment like that while imagining some invisible force gently guiding these newly unemployed people to their new careers. However in reality thousands of people have now lost their income and likely their health insurance, and will have to compete in what in many places is a pretty brutal and not at all healthy job market. It sucks, and there’s nothing you or I can do about it ... but pretending that this is actually a good thing for anyone but a handful of rich guys who will have made out like bandits on the whole debacle is just fantasy.
- kelleoeo 9y ago
  I want you and everyone else to stop kowtowing to blatant nonsense and “daddy”. Physics and economics are not one and the same. Ownership is not divine and should be treated as such. Paulo Freire and others are better at explaining the reality. This forum is a wasteland of neoliberal babies who want to build a giant castle to their egos and live in it. Grow up a bit. Be less ignorant of history and stop fetishizing economic output. If we have to motivate the species so hard to produce, perhaps economy is inherent to our biology. But next quarter growth or bust! Clueless rubes

metabagel 9y ago

We don't actually know how it worked out for them, because reportedly they spent twelve years siphoning off cash from Toys 'R' Us.

harryh 9y ago
We do know actually: https://www.bloomberg.com/news/articles/2017-09-19/bain-kkr-vornado-suffer-wipeout-in-toys-r-us-bankruptcy https://www.bloomberg.com/news/articles/2017-09-19/bain-kkr-...
- metabagel 9y ago
  Marketplace says that Bain and KKR still made money off of the deal. https://www.marketplace.org/2018/03/06/business/toys-r-us-and-how-retail-downturn-story-about-debt https://www.marketplace.org/2018/03/06/business/toys-r-us-an... "The private equity firms’ investors haven’t made money off this deal. But the firms themselves have. It’s unclear where Vornado ended up. But after collecting fees from Toys R Us, Bain and KKR each took home at least $15 million."
  - harryh 9y ago
    That says they earned revenue, not a profit. They did not earn a profit.

bhouston 9y ago

According to my calculations in this comment they are at least close to net zero: https://news.ycombinator.com/item?id=16906549 https://news.ycombinator.com/item?id=16906549 Which is pretty good outcome for them given TRU has failed completely.

JumpCrisscross 9y ago
You overestimate interest and fees, paid by Toys 'R' Us to the PE firms, by over 100%. We know the actual numbers from SEC and bankruptcy filings [1]. [1] https://www.bloomberg.com/news/articles/2017-09-19/bain-kkr-vornado-suffer-wipeout-in-toys-r-us-bankruptcy https://www.bloomberg.com/news/articles/2017-09-19/bain-kkr-...
- bhouston 9y ago
  So either the interest amount of $435M per year (which is roughly 15% interest on 6.6B) is incorrect from the original article or they receives less than 20% of that interest? Strange. $270M over 13 years from $1.1B in loans? ($270M = $470M - the $200M in fees.) That seems incredibly low interest. I am suspicious. LBO firms do not give low interest loans to their targets. If we assume an interest rate of 5%, you get 50M in interest a year on 1B. 13 years will yeild $750M in interest. Did these LBO firms really offer loads at something like 1.5%? Something isn't adding up.
  - JumpCrisscross 9y ago
    > they receives less than 20% of that interest? They hold less than 20% of the debt. Most of their investment went in as equity. That's wiped out. > LBO firms do not give low interest loans to their targets PE buys equity and subordinated debt. Sub debt has high rates and wonky structures. In this case, I believe it was pay in kind, "a type of high-risk loan or bond that allows borrowers to pay interest with additional debt rather than cash" [1]. Nice feature if the debt is repaid. Less fun when it's wiped out. [1] https://en.wikipedia.org/wiki/PIK_loan https://en.wikipedia.org/wiki/PIK_loan