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Sorry, advisory fees. We don't know how much they siphoned out of Toys 'R' Us over the last twelve years, and without that information it's premature to say tha

Sorry, advisory fees. We don't know how much they siphoned out of Toys 'R' Us over the last twelve years, and without that information it's premature to say that they lost money on the deal.

JumpCrisscross 9y ago
> We don't know how much they siphoned out of Toys 'R' Us over the last twelve years Yes, we do. It's disclosed in SEC and bankruptcy filings; they lost money [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-...
- metabagel 9y ago
  Thanks for that. OK, so Bain and KKR made back $470 million in fees. Marketplace says that Bain and KKR 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."
  - JumpCrisscross 9y ago
    > But after collecting fees from Toys R Us, Bain and KKR each took home at least $15 million With all due respect to you, the author of that article doesn't understand how PE funds work. (Most people don't. But one shouldn't write an article if that badly misinformed.) Private equity funds are structured assuming portfolio companies won't vanish. They may lose some money. But between 1998 and 2010 only 4.9% of PE-backed companies defaulted, and of those, 72% did a Chapter 11 or pre-packaged bankruptcy [1]. As a result, when funds get fees or interests, the general partners are allowed to pay themselves a little something up front. If it turns out they overpaid themselves in year 1, they can make up for it by underpaying themselves in year 7. Which makes a liquidation, like this one, nasty for the managers. First, their high water mark is toast. Second, most of that $15 million will find its way to the fund's limited partners. If the fund paid out its managers, clawback terms could be triggered. That means fuck year 7, you return the overpayment now. Private equity managers are smart. But their limited partners aren't dunces. We've gone through cycles, up and down, with PE. The terms have "learned". Liquidations of PE-backed companies are rare. Nobody is walking away from this happy or whole. [1] http://portal.idc.ac.il/en/schools/economics/about/documents/per_strömberg.pdf http://portal.idc.ac.il/en/schools/economics/about/documents...

Sorry, advisory fees. We don't know how much they siphoned out of Toys 'R' Us over the last twelve years, and without that information it's premature to say that they lost money on the deal.

JumpCrisscross 9y ago

> We don't know how much they siphoned out of Toys 'R' Us over the last twelve years Yes, we do. It's disclosed in SEC and bankruptcy filings; they lost money [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-...

metabagel 9y ago
Thanks for that. OK, so Bain and KKR made back $470 million in fees. Marketplace says that Bain and KKR 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."
- JumpCrisscross 9y ago
  > But after collecting fees from Toys R Us, Bain and KKR each took home at least $15 million With all due respect to you, the author of that article doesn't understand how PE funds work. (Most people don't. But one shouldn't write an article if that badly misinformed.) Private equity funds are structured assuming portfolio companies won't vanish. They may lose some money. But between 1998 and 2010 only 4.9% of PE-backed companies defaulted, and of those, 72% did a Chapter 11 or pre-packaged bankruptcy [1]. As a result, when funds get fees or interests, the general partners are allowed to pay themselves a little something up front. If it turns out they overpaid themselves in year 1, they can make up for it by underpaying themselves in year 7. Which makes a liquidation, like this one, nasty for the managers. First, their high water mark is toast. Second, most of that $15 million will find its way to the fund's limited partners. If the fund paid out its managers, clawback terms could be triggered. That means fuck year 7, you return the overpayment now. Private equity managers are smart. But their limited partners aren't dunces. We've gone through cycles, up and down, with PE. The terms have "learned". Liquidations of PE-backed companies are rare. Nobody is walking away from this happy or whole. [1] http://portal.idc.ac.il/en/schools/economics/about/documents/per_strömberg.pdf http://portal.idc.ac.il/en/schools/economics/about/documents...