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Their debt comes from their acquisition. I'm not sure I understand how this is even possible, but it seems that hedge funds are able to buy entities (like Cirqu
by kalenx 6y ago
Their debt comes from their acquisition. I'm not sure I understand how this is even possible, but it seems that hedge funds are able to buy entities (like Cirque du Soleil) and transfer the cost of acquisition as a debt for the acquiree -- and, of course, not be responsible for this debt.
- himinlomax 6y agohttps://en.wikipedia.org/wiki/Leveraged_buyout https://en.wikipedia.org/wiki/Leveraged_buyout
- locopati 6y agovampire capitalism https://www.shoutoutuk.org/2016/05/26/vampire-capitalism/ https://www.shoutoutuk.org/2016/05/26/vampire-capitalism/
- xtracto 6y agoSame thing that happened to Toys R Us if I recall correctly. So sad.
- smabie 6y agoI mean KKR and Bain took over Toys R Us in 2005 and it filed for bankruptcy in late 2017. At the time of the LBO in 2005, Toys R Us was already hurting and not in the best place. Though we can't know the path not taken, it's probable that Toys R Us would have shut down earlier, the LBO might have been its best chance of success. Based on the articles that I've read about the LBO, I think there is an argument to made that Toys R Us was mismanaged after the takeover: a gargantuan sum was spent every year to service the debt that was taken on after the LBO. People point out that because of this, Toys R Us was unable to make the capital investments to compete with Amazon and big-box stores. But it's not clear to me that TRU could even begin to compete, even if they had the money for capital investment. Most of TRU's business is holiday gifts, which is particularly sensitive to disruption by online retailers. No one is stopping into TRU at the last minute for same household staple, everytime someone needs a toy you know in advance (birthdays, holidays, etc). Because of this, how could they ever have competed with Amazon?