I remember seeing TRU stores in movies back in the day when I was a kid (80s) and wished we had something similar back home (Turkey). Then in the 2000s I think, they opened a store in Istanbul. I went in to buy something for my nephew's birthday and t was extremely overpriced. It was cheaper to buy it from Amazon and get it shipped here. Go figure.
i live in a country with a batshit crazy president and no, english is not my first language
I'm kind of curious about that requirement to ship product to TRU on unsecured trade credit. Like.. if I were a business, I'd require you to actually buy your shit... Maybe that was in anticipation of Christmas?
This is how most big-box retail stores operate, though.
I'm kind of curious about that requirement to ship product to TRU on unsecured trade credit. Like.. if I were a business, I'd require you to actually buy your shit... Maybe that was in anticipation of Christmas?
This is how most big-box retail stores operate, though.
Basically, major retailers are usually stable enough that they can work out relationships with suppliers based on their credit and name alone. The fact that TRU was able to do this even with their financial issues says a lot about their position in the retail market.
Successful exits are pretty common. They're just not headliners. These big ticket super newsworthy failures overstate their regularity.
Pretty sure most of my former clients that I used to audit are still running 4+ years ago and they were all PE assets.
But maybe I wasn't around to see the failures.
If the plan was to properly handle and grow the company using good business practices to improve profit and pay back the loan, then the bank should have no problem changing the bankruptcy laws such that it gets paid only according to its fraction of the held debt levels. Not first because it is the largest debt holder.
Since we know that is not the case, and the banks doing this would rather not make the loans than agree to that, we can say conclusively that these are not simply poorly understood financial instruments.
They are just ways to exploit US bankruptcy laws to bring profits to the banks and the capital firms, while outsourcing risk to the workers, suppliers and small contractors.
This comment is incredibly dismissive and ignorant in so many ways. Like, no discussion on senior vs subordinated debts, no real discussion but a bunch of Late capitalism subreddit derivative shlock
major retailers don't even have cash to make the next cycle's payroll, its why the economy was in so much real danger when the banks started failing - if commercial paper had frozen up millions wouldn't have gotten paid
Like an LBO with mezzanine debt is probably riskier and ugly than just a straight up 30 year term loan with maybe a revolver. Throw some equity or warrants in the mix. All relatively basic and easy things but put them in one package and suddenly you have a tool for destruction!!
Who knows what they'll do next? Perhaps sell certificates that entitle right people to a deposit??
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MeeqeLord of the pants most fancySomeplace amazingRegistered Userregular
People don't need to know the arcane details of debt service management in order to observe that the net effects of said management are harmful to many.
Yeah, management was bad. That's the point. Not leveraged buyouts. This buyout. Not all financial assets are awful.
No, but if one is designed in a way that makes it easy to abuse, then we should either rework it to discourage abuse, or if that's not possible, get rid of it.
You keep saying "management was bad", but that is ignoring the problem. Bain Capital isn't "bad", they're a vulture capitalist that makes their money by killing firms and selling their corpse off to the highest bidder - and they're able to do this because leveraged buyouts can be easily abused to such ends.
Your argument is a financial flavored version of "guns don't kill people." Yes, the ultimate culprit is Bain Capital, but there's a reason that they keep going back to the leveraged buyout - because it's an effective tool for what they want to do to these businesses. And they way you stop them is to make it so they are disincentivized from doing this, and one effective way would be to revise their tool so it doesn't work for that purpose anymore.
Your argument is a financial flavored version of "guns don't kill people." Yes, the ultimate culprit is Bain Capital, but there's a reason that they keep going back to the leveraged buyout - because it's an effective tool for what they want to do to these businesses. And they way you stop them is to make it so they are disincentivized from doing this, and one effective way would be to revise their tool so it doesn't work for that purpose anymore.
For that matter, if management is the cause, management should suffer the consequences.
Thanks to leveraged buyout and bankruptcy, everyone but management lose.
That's not a good argument for the financial tools they used to transfer wealth from the poor to the rich.
Private equity firms have their leverage amounts already limited, too. 6 times limit. We actually have a former forumer at one of the regulators, the OCC. I can ping her with some questions.
Tyrannus, what is your opinion on changing bankruptcy laws to increase the risk to the bank on failure? I'm willing to believe leveraged buy outs aren't all bad. But can/should banks be exposed to more risk to prevent chronically poor managers from repeatedly securing loans?
In short, how do we punish Bain Capital?
Marty: The future, it's where you're going? Doc: That's right, twenty five years into the future. I've always dreamed on seeing the future, looking beyond my years, seeing the progress of mankind. I'll also be able to see who wins the next twenty-five world series.
Tyrannus, what is your opinion on changing bankruptcy laws to increase the risk to the bank on failure? I'm willing to believe leveraged buy outs aren't all bad. But can/should banks be exposed to more risk to prevent chronically poor managers from repeatedly securing loans?
In short, how do we punish Bain Capital?
I am exhausted but here are my thoughts:
Someone should be paying more. Like..
I want to say that the regulatory environment has changed positively with increasing pressure against overly aggressive LBOs. I like debt structuring, I truly do, but we've put a lot of effort into restricting and stomping out potential massive fires when it comes to overleveraged buyouts. Everyone hates them. But I don't think they hate them for the right reasons.
Honestly I think PE firms are popular just because of how quickly and quietly they can make gigantic decisions and because sophisticated rich assholes have access to a special vehicle designed to cater to their tastes. I say quick and quiet relative, to say, a public company. These PE firms offer esoteric illiquid assets and they offer these ridiculous returns (altho not in this case apparently) because they don't encourage any kinda spending. It's just extra rich people savings .I'd want to start chipping away at all of those issues than trying to narrow down exactly how to regulate the 100s of moving parts on different LBOs any further.
This is where it's hard, because people suggest between something as light handed where there are material disclosures with each investment on the PE books (but then you have them being disclosed on OTHER financial statements no one reads) to as heavy handed as disallowing the deduction of interest. As for where the debt sits on the balance sheet, it's like a game of musical chairs - does the Company get to dance around the debt facility it's using to secure it's capital? Should Bain be able to push that debt down to the acquisition and not have to disclose it at all? I mean, they probably don't sit on a consolidating interest anyway, so...
Successful exits are pretty common. They're just not headliners. These big ticket super newsworthy failures overstate their regularity.
Pretty sure most of my former clients that I used to audit are still running 4+ years ago and they were all PE assets.
But maybe I wasn't around to see the failures.
If the plan was to properly handle and grow the company using good business practices to improve profit and pay back the loan, then the bank should have no problem changing the bankruptcy laws such that it gets paid only according to its fraction of the held debt levels. Not first because it is the largest debt holder.
Since we know that is not the case, and the banks doing this would rather not make the loans than agree to that, we can say conclusively that these are not simply poorly understood financial instruments.
They are just ways to exploit US bankruptcy laws to bring profits to the banks and the capital firms, while outsourcing risk to the workers, suppliers and small contractors.
This comment is incredibly dismissive and ignorant in so many ways. Like, no discussion on senior vs subordinated debts, no real discussion but a bunch of Late capitalism subreddit derivative shlock
I see I see. Sorry to have misunderstood so greatly. With your knowledge on the issue, can you fill me in on a few things.
1) so, clearly the bank will be taking an enormous hit here. In any fair system they’ll be out hundreds of millions of dollars at lest. Probably billions. Should we be concerned that the bank will collapse?
2) In a fair and equitable system as we have, clearly the desperate lawsuits by LEGO and others is just frivolous nonsense. How swiftly do you expect those vendors to be paid?
3) due to the massive risk of this enormous debt shifted to toys r us, the bank must have insisted on an aggressive amount of payments on the loan principal above interest. How much did Bain manage to decrease the debt of toys r us by?
4) clearly every employee will be receiving a 100% payout on their vacation days before the bank gets a penny, when will they be paid that?
Please. I’ll stop being dismissive of Bain capitols vulture capitalism when it is more beneficial to society than a violent drug gang. Also, it’s hilarious to blame this on bad management. Bain has made millions on this deal, so has the bank. Literally everything has gone exactly as Bain capitol planned on day 1. This has been excellent management.
I'm sure not posting a solid operating profit for 5 years didn't fucking hurt
also, how do I not know this isn't just another ploy by management? 10 years ago the executives all got to have massive fucking incentive bonuses to stay on to help "right the ship". you see it 100 times, over and over.
the people that helped sink the ship get paid lucrative amounts to stay onboard
also @AngelHedgie financial instruments, pieces of shitty paper, are regulated more than guns.
I'm sure not posting a solid operating profit for 5 years didn't fucking hurt
also, how do I not know this isn't just another ploy by management? 10 years ago the executives all got to have massive fucking incentive bonuses to stay on to help "right the ship". you see it 100 times, over and over.
the people that helped sink the ship get paid lucrative amounts to stay onboard
also @AngelHedgie financial instruments, pieces of shitty paper, are regulated more than guns.
Uh ... that is not really a very strong point dude, considering america and it's gun laws.
Financial instruments are horribly under-regulated. Just like guns. And the results of that under-regulation speaks for itself in the lives they both destroy.
I'm sure not posting a solid operating profit for 5 years didn't fucking hurt
also, how do I not know this isn't just another ploy by management? 10 years ago the executives all got to have massive fucking incentive bonuses to stay on to help "right the ship". you see it 100 times, over and over.
the people that helped sink the ship get paid lucrative amounts to stay onboard
also @AngelHedgie financial instruments, pieces of shitty paper, are regulated more than guns.
Posting a solid operating profit but not paying down the principle on a loan for 80% of the value of the property should raise some huge red flags.
What do you mean a "ploy by management"? And who is the vague "management" you keep referring too? Because the way your posts read it sounds like the bad guys company in a Dollhouse remake.
I'm sure not posting a solid operating profit for 5 years didn't fucking hurt
also, how do I not know this isn't just another ploy by management? 10 years ago the executives all got to have massive fucking incentive bonuses to stay on to help "right the ship". you see it 100 times, over and over.
the people that helped sink the ship get paid lucrative amounts to stay onboard
also @AngelHedgie financial instruments, pieces of shitty paper, are regulated more than guns.
The purpose of management since the buyout has been to make money for Bain capital while investing nothing in the company. They have succeeded 'admirably'
I'm sure not posting a solid operating profit for 5 years didn't fucking hurt
also, how do I not know this isn't just another ploy by management? 10 years ago the executives all got to have massive fucking incentive bonuses to stay on to help "right the ship". you see it 100 times, over and over.
the people that helped sink the ship get paid lucrative amounts to stay onboard
also @AngelHedgie financial instruments, pieces of shitty paper, are regulated more than guns.
The purpose of management since the buyout has been to make money for Bain capital while investing nothing in the company. They have succeeded 'admirably'
If they lose money, Bain and them also lose money. Investors in the portfolio also lose money. Do you not get how ownership works?
I'm sure not posting a solid operating profit for 5 years didn't fucking hurt
also, how do I not know this isn't just another ploy by management? 10 years ago the executives all got to have massive fucking incentive bonuses to stay on to help "right the ship". you see it 100 times, over and over.
the people that helped sink the ship get paid lucrative amounts to stay onboard
also @AngelHedgie financial instruments, pieces of shitty paper, are regulated more than guns.
Posting a solid operating profit but not paying down the principle on a loan for 80% of the value of the property should raise some huge red flags.
What do you mean a "ploy by management"? And who is the vague "management" you keep referring too? Because the way your posts read it sounds like the bad guys company in a Dollhouse remake.
What do guns have to do with anything?
2005, 2017, and now in 2018 all executives got massive bonuses either paid or designed to be paid to stay on board. I'm sure you can Google this but please explain why you feel like a struggling company that couldn't pay it's debts now suddenly has the money to pay or promise to pay the executives massive bonuses.
I'm sure not posting a solid operating profit for 5 years didn't fucking hurt
also, how do I not know this isn't just another ploy by management? 10 years ago the executives all got to have massive fucking incentive bonuses to stay on to help "right the ship". you see it 100 times, over and over.
the people that helped sink the ship get paid lucrative amounts to stay onboard
also @AngelHedgie financial instruments, pieces of shitty paper, are regulated more than guns.
The purpose of management since the buyout has been to make money for Bain capital while investing nothing in the company. They have succeeded 'admirably'
If they lose money, Bain and them also lose money. Investors in the portfolio also lose money. Do you not get how ownership works?
Bain doesn't work by making money in the long term. They have one goal with businesses like TRU, sell off the parts then move onto the next business in debt etc. That's all they care about.
I'm sure not posting a solid operating profit for 5 years didn't fucking hurt
also, how do I not know this isn't just another ploy by management? 10 years ago the executives all got to have massive fucking incentive bonuses to stay on to help "right the ship". you see it 100 times, over and over.
the people that helped sink the ship get paid lucrative amounts to stay onboard
also @AngelHedgie financial instruments, pieces of shitty paper, are regulated more than guns.
The purpose of management since the buyout has been to make money for Bain capital while investing nothing in the company. They have succeeded 'admirably'
If they lose money, Bain and them also lose money. Investors in the portfolio also lose money. Do you not get how ownership works?
Bain doesn't work by making money in the long term. They have one goal with businesses like TRU, sell off the parts then move onto the next business in debt etc. That's all they care about.
And I dislike this. It's a garbage business model. You make more money when the company is worth something. Normal PE firms understand this. I don't like Bain. I think Bain sucks but also the executives and those charged with government (collectively management) fucked up too.
I'm sure not posting a solid operating profit for 5 years didn't fucking hurt
also, how do I not know this isn't just another ploy by management? 10 years ago the executives all got to have massive fucking incentive bonuses to stay on to help "right the ship". you see it 100 times, over and over.
the people that helped sink the ship get paid lucrative amounts to stay onboard
also @AngelHedgie financial instruments, pieces of shitty paper, are regulated more than guns.
The purpose of management since the buyout has been to make money for Bain capital while investing nothing in the company. They have succeeded 'admirably'
If they lose money, Bain and them also lose money. Investors in the portfolio also lose money. Do you not get how ownership works?
Bain doesn't lose money from TRU going under. That's the whole point.
While racing light mechs, your Urbanmech comes in second place, but only because it ran out of ammo.
I'm sure not posting a solid operating profit for 5 years didn't fucking hurt
also, how do I not know this isn't just another ploy by management? 10 years ago the executives all got to have massive fucking incentive bonuses to stay on to help "right the ship". you see it 100 times, over and over.
the people that helped sink the ship get paid lucrative amounts to stay onboard
also @AngelHedgie financial instruments, pieces of shitty paper, are regulated more than guns.
Posting a solid operating profit but not paying down the principle on a loan for 80% of the value of the property should raise some huge red flags.
What do you mean a "ploy by management"? And who is the vague "management" you keep referring too? Because the way your posts read it sounds like the bad guys company in a Dollhouse remake.
What do guns have to do with anything?
2005, 2017, and now in 2018 all executives got massive bonuses either paid or designed to be paid to stay on board. I'm sure you can Google this but please explain why you feel like a struggling company that couldn't pay it's debts now suddenly has the money to pay or promise to pay the executives massive bonuses.
Corporate leadership is in a position to ensure that they get paid regardless of company performance. After all the data breaches were exposed at Equifax last year, CEO Richard Smith left the company with a $7.6M golden parachute. The same thing could be happening at TRU. Recall that TRU is a private corporation, not publicly traded. So they don't have a legal incentive to place company performance first. And they see the financial records of TRU, meaning they know when it's the best time to squeeze cash out and bail.
I'm sure not posting a solid operating profit for 5 years didn't fucking hurt
also, how do I not know this isn't just another ploy by management? 10 years ago the executives all got to have massive fucking incentive bonuses to stay on to help "right the ship". you see it 100 times, over and over.
the people that helped sink the ship get paid lucrative amounts to stay onboard
also @AngelHedgie financial instruments, pieces of shitty paper, are regulated more than guns.
The purpose of management since the buyout has been to make money for Bain capital while investing nothing in the company. They have succeeded 'admirably'
If they lose money, Bain and them also lose money. Investors in the portfolio also lose money. Do you not get how ownership works?
Bain doesn't work by making money in the long term. They have one goal with businesses like TRU, sell off the parts then move onto the next business in debt etc. That's all they care about.
And I dislike this. It's a garbage business model. You make more money when the company is worth something. Normal PE firms understand this. I don't like Bain. I think Bain sucks but also the executives and those charged with government (collectively management) fucked up too.
It is a garbage business model if you judge the business on long term success. It is not a garbage business model if your goal is to maximize short term profit, which is what Bain is doing. Bain leadership didn't "fuck up" in this case. They specifically chose to make interest only payments to the bank and run the business until it failed, at which time the bank is paid out through liquidation of the company.
I'm sure not posting a solid operating profit for 5 years didn't fucking hurt
also, how do I not know this isn't just another ploy by management? 10 years ago the executives all got to have massive fucking incentive bonuses to stay on to help "right the ship". you see it 100 times, over and over.
the people that helped sink the ship get paid lucrative amounts to stay onboard
also @AngelHedgie financial instruments, pieces of shitty paper, are regulated more than guns.
The purpose of management since the buyout has been to make money for Bain capital while investing nothing in the company. They have succeeded 'admirably'
If they lose money, Bain and them also lose money. Investors in the portfolio also lose money. Do you not get how ownership works?
Bain doesn't lose money from TRU going under. That's the whole point.
I follow this: TRU balance sheet assets are depreciated to near zero. Following a bankruptcy they're repriced to be marked up to a special liquidation value from a firm. This marked up value should carry differently then what Bain and them have on their books. Not sure if it's lower, haven't done bankruptcy valuation since a pharm company. Anyway Bain then... what? gets TRU to then sell these assets for money, which is now worth more than it was (fully depreciated assets are sitting at 0) because of the bankruptcy valuation? I also imagine they get paid a management fee by the portfolio company?
How are you connection the cash flows from TRU asset sales and Bain without considering Bain as management, I guess.
And Bain probably had TRU on it's balance sheet higher in 2006 than now. That values probably sitting around that liquidation value is I mentioned before.
Just not sure if they've squeezed enough out of TRU to cover initial investment. Because structuring LBOs are not cheap, on top of all the other things Bain is required to perform with or for its portfolio assets.
I'm sure not posting a solid operating profit for 5 years didn't fucking hurt
also, how do I not know this isn't just another ploy by management? 10 years ago the executives all got to have massive fucking incentive bonuses to stay on to help "right the ship". you see it 100 times, over and over.
the people that helped sink the ship get paid lucrative amounts to stay onboard
also @AngelHedgie financial instruments, pieces of shitty paper, are regulated more than guns.
The purpose of management since the buyout has been to make money for Bain capital while investing nothing in the company. They have succeeded 'admirably'
If they lose money, Bain and them also lose money. Investors in the portfolio also lose money. Do you not get how ownership works?
Bain doesn't lose money from TRU going under. That's the whole point.
I follow this: TRU balance sheet assets are depreciated to near zero. Following a bankruptcy they're repriced to be marked up to a special liquidation value from a firm. This marked up value should carry differently then what Bain and them have on their books. Not sure if it's lower, haven't done bankruptcy valuation since a pharm company. Anyway Bain then... what? gets TRU to then sell these assets for money, which is now worth more than it was (fully depreciated assets are sitting at 0) because of the bankruptcy valuation? I also imagine they get paid a management fee by the portfolio company?
How are you connection the cash flows from TRU asset sales and Bain without considering Bain as management, I guess.
And Bain probably had TRU on it's balance sheet higher in 2006 than now. That values probably sitting around that liquidation value is I mentioned before.
Just not sure if they've squeezed enough out of TRU to cover initial investment. Because structuring LBOs are not cheap, on top of all the other things Bain is required to perform with or for its portfolio assets.
Bain keeps the exorbitant amount of management feeds that they've been paid by TRU over the past 13 years. The bank gets the lion's share, if not all, of the cash from sales of TRU assets.
I don't particularly care if Bain made or lost money on TRU. What I care about was Bain's garbage business model which was and is predicated around TRU failing. You shouldn't get rewarded for running your business into the ground.
I'm sure not posting a solid operating profit for 5 years didn't fucking hurt
also, how do I not know this isn't just another ploy by management? 10 years ago the executives all got to have massive fucking incentive bonuses to stay on to help "right the ship". you see it 100 times, over and over.
the people that helped sink the ship get paid lucrative amounts to stay onboard
also @AngelHedgie financial instruments, pieces of shitty paper, are regulated more than guns.
The purpose of management since the buyout has been to make money for Bain capital while investing nothing in the company. They have succeeded 'admirably'
If they lose money, Bain and them also lose money. Investors in the portfolio also lose money. Do you not get how ownership works?
Bain doesn't lose money from TRU going under. That's the whole point.
I follow this: TRU balance sheet assets are depreciated to near zero. Following a bankruptcy they're repriced to be marked up to a special liquidation value from a firm. This marked up value should carry differently then what Bain and them have on their books. Not sure if it's lower, haven't done bankruptcy valuation since a pharm company. Anyway Bain then... what? gets TRU to then sell these assets for money, which is now worth more than it was (fully depreciated assets are sitting at 0) because of the bankruptcy valuation? I also imagine they get paid a management fee by the portfolio company?
How are you connection the cash flows from TRU asset sales and Bain without considering Bain as management, I guess.
And Bain probably had TRU on it's balance sheet higher in 2006 than now. That values probably sitting around that liquidation value is I mentioned before.
Just not sure if they've squeezed enough out of TRU to cover initial investment. Because structuring LBOs are not cheap, on top of all the other things Bain is required to perform with or for its portfolio assets.
Bain keeps the exorbitant amount of management feeds that they've been paid by TRU over the past 13 years. The bank gets the lion's share, if not all, of the cash from sales of TRU assets.
I don't particularly care if Bain made or lost money on TRU. What I care about was Bain's garbage business model which was and is predicated around TRU failing. You shouldn't get rewarded for running your business into the ground.
We agree. But the bank that made these loans, the LBO's term loan and revolver, probably has other banks involved. Deutsche Bank, for example, will go to other bank banks, to pool up the shitload of cash. After the deal (the Lbo) clears, they immediately tranche up and reassign that debt to other investors for cash. Like, 1,000,000 term loan only LBO sourced by Deutsche mightt have JPM, BOA, etc all having contributed 250k to loan. Those banks can immediately sell off portions of their 250k to other investors so the selling banks recognize the NPV of the loan all in 1 day
I'm sure not posting a solid operating profit for 5 years didn't fucking hurt
also, how do I not know this isn't just another ploy by management? 10 years ago the executives all got to have massive fucking incentive bonuses to stay on to help "right the ship". you see it 100 times, over and over.
the people that helped sink the ship get paid lucrative amounts to stay onboard
also @AngelHedgie financial instruments, pieces of shitty paper, are regulated more than guns.
The purpose of management since the buyout has been to make money for Bain capital while investing nothing in the company. They have succeeded 'admirably'
If they lose money, Bain and them also lose money. Investors in the portfolio also lose money. Do you not get how ownership works?
Bain doesn't lose money from TRU going under. That's the whole point.
I follow this: TRU balance sheet assets are depreciated to near zero. Following a bankruptcy they're repriced to be marked up to a special liquidation value from a firm. This marked up value should carry differently then what Bain and them have on their books. Not sure if it's lower, haven't done bankruptcy valuation since a pharm company. Anyway Bain then... what? gets TRU to then sell these assets for money, which is now worth more than it was (fully depreciated assets are sitting at 0) because of the bankruptcy valuation? I also imagine they get paid a management fee by the portfolio company?
How are you connection the cash flows from TRU asset sales and Bain without considering Bain as management, I guess.
And Bain probably had TRU on it's balance sheet higher in 2006 than now. That values probably sitting around that liquidation value is I mentioned before.
Just not sure if they've squeezed enough out of TRU to cover initial investment. Because structuring LBOs are not cheap, on top of all the other things Bain is required to perform with or for its portfolio assets.
Bain keeps the exorbitant amount of management feeds that they've been paid by TRU over the past 13 years. The bank gets the lion's share, if not all, of the cash from sales of TRU assets.
I don't particularly care if Bain made or lost money on TRU. What I care about was Bain's garbage business model which was and is predicated around TRU failing. You shouldn't get rewarded for running your business into the ground.
We agree. But the bank that made these loans, the LBO's term loan and revolver, probably has other banks involved. Deutsche Bank, for example, will go to other bank banks, to pool up the shitload of cash. After the deal (the Lbo) clears, they immediately tranche up and reassign that debt to other investors for cash. Like, 1,000,000 term loan only LBO sourced by Deutsche mightt have JPM, BOA, etc all having contributed 250k to loan. Those banks can immediately sell off portions of their 250k to other investors so the selling banks recognize the NPV of the loan all in 1 day
Yeah, but it doesn't matter that Deutsche Bank sells it's loan holding to another bank. The banking industry as a whole is set up not to take a loss on this transaction. The banking industry took in over 13 years approximately $400M per year ($5,200Mish in total), and then gets to sell of the business to recoup their principle. The banks, by design, cannot lose in this scenario.
Bain Capital, by design, cannot lose in this scenario.
This scenario being where they take a successful company, run it into the ground, and sell it for parts, extracting all of the value of the company as cash. And that's the problem. This does nothing to improve society in any way. It's just a mechanism for the rich to extract cash out of society and place the burden onto society.
I'm sure not posting a solid operating profit for 5 years didn't fucking hurt
also, how do I not know this isn't just another ploy by management? 10 years ago the executives all got to have massive fucking incentive bonuses to stay on to help "right the ship". you see it 100 times, over and over.
the people that helped sink the ship get paid lucrative amounts to stay onboard
also @AngelHedgie financial instruments, pieces of shitty paper, are regulated more than guns.
The purpose of management since the buyout has been to make money for Bain capital while investing nothing in the company. They have succeeded 'admirably'
If they lose money, Bain and them also lose money. Investors in the portfolio also lose money. Do you not get how ownership works?
Bain doesn't lose money from TRU going under. That's the whole point.
I follow this: TRU balance sheet assets are depreciated to near zero. Following a bankruptcy they're repriced to be marked up to a special liquidation value from a firm. This marked up value should carry differently then what Bain and them have on their books. Not sure if it's lower, haven't done bankruptcy valuation since a pharm company. Anyway Bain then... what? gets TRU to then sell these assets for money, which is now worth more than it was (fully depreciated assets are sitting at 0) because of the bankruptcy valuation? I also imagine they get paid a management fee by the portfolio company?
How are you connection the cash flows from TRU asset sales and Bain without considering Bain as management, I guess.
And Bain probably had TRU on it's balance sheet higher in 2006 than now. That values probably sitting around that liquidation value is I mentioned before.
Just not sure if they've squeezed enough out of TRU to cover initial investment. Because structuring LBOs are not cheap, on top of all the other things Bain is required to perform with or for its portfolio assets.
Bain keeps the exorbitant amount of management feeds that they've been paid by TRU over the past 13 years. The bank gets the lion's share, if not all, of the cash from sales of TRU assets.
I don't particularly care if Bain made or lost money on TRU. What I care about was Bain's garbage business model which was and is predicated around TRU failing. You shouldn't get rewarded for running your business into the ground.
We agree. But the bank that made these loans, the LBO's term loan and revolver, probably has other banks involved. Deutsche Bank, for example, will go to other bank banks, to pool up the shitload of cash. After the deal (the Lbo) clears, they immediately tranche up and reassign that debt to other investors for cash. Like, 1,000,000 term loan only LBO sourced by Deutsche mightt have JPM, BOA, etc all having contributed 250k to loan. Those banks can immediately sell off portions of their 250k to other investors so the selling banks recognize the NPV of the loan all in 1 day
Yeah, but it doesn't matter that Deutsche Bank sells it's loan holding to another bank. The banking industry as a whole is set up not to take a loss on this transaction. The banking industry took in over 13 years approximately $400M per year ($5,200Mish in total), and then gets to sell of the business to recoup their principle. The banks, by design, cannot lose in this scenario.
Bain Capital, by design, cannot lose in this scenario.
This scenario being where they take a successful company, run it into the ground, and sell it for parts, extracting all of the value of the company as cash. And that's the problem. This does nothing to improve society in any way. It's just a mechanism for the rich to extract cash out of society and place the burden onto society.
The Banks cannot lose, I don't believe. They no longer have to write down the loan because they don't hold it. . But Bain still can, though. They still have the asset. It can still go down to zero. The individual pieces of TRU aren't worth more than the sum of it's parts. If that's the case then stripping the assets actually makes financial sense.
Would Deutsche Bank have been able to convince the other banks if they weren't allowed to move the asset off their own books, though. The value of that debt goes to zero and whoever holds it eats that loss. I think that would change the appetites of banks to invest. That's not an LBO issue, that's a debt in general issue. Is the liquidity offered by this assignment of debt worth it to society when it enables people like Bain to loot n scoot?
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Dark Raven XLaugh hard, run fast,be kindRegistered Userregular
Plot twist, the liquidation sale is delayed because a court wouldn't sign off on it? I found out at the door at 0957 in the am. As did like 20 other people. Those... poor employees. They're gonna get so much shit for this. :I
Oh brilliant
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KetarCome on upstairswe're having a partyRegistered Userregular
Plot twist, the liquidation sale is delayed because a court wouldn't sign off on it? I found out at the door at 0957 in the am. As did like 20 other people. Those... poor employees. They're gonna get so much shit for this. :I
There's nothing worthwhile at the beginning of a liquidation sale anyway. The prices are usually marked up to even higher than they had been pre-sale so they can say that everything is 10% off and make as much or more money than they would have before. After a week, everything is 20% off. And so on.
You don't actually start seeing deals on most items until 30% or more, and even then it's only a small percentage below what the normal retail would have been. By the time you start seeing good deals on things the sale has been going on for so long and is so picked over by people who went in expecting great deals at a liquidation and refused to leave with nothing that there is very little left that you would actually want in most circumstances.
Plot twist, the liquidation sale is delayed because a court wouldn't sign off on it? I found out at the door at 0957 in the am. As did like 20 other people. Those... poor employees. They're gonna get so much shit for this. :I
TRU, like many other big box stores, doesn't buy its stock of merchandise outright, but basically has it sent to them by manufacturers, paying when it's sold. A number of toy manufacturers, most notably The LEGO Group, filed for an injunction, because they want the unsold, unpaid stock shipped back to them, not sold at clearance prices.
Dark Raven XLaugh hard, run fast,be kindRegistered Userregular
Yeh, I was going in thinking it would be quiet, get 10% off a vidya and say bye to the store, but it was swamped with angry entitled folks, yelling at the teenagers for wasting their time.
Also confirmed all the Lego had been marked up even higher, so. Whoo. ;P
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I remember seeing TRU stores in movies back in the day when I was a kid (80s) and wished we had something similar back home (Turkey). Then in the 2000s I think, they opened a store in Istanbul. I went in to buy something for my nephew's birthday and t was extremely overpriced. It was cheaper to buy it from Amazon and get it shipped here. Go figure.
This is how most big-box retail stores operate, though.
Rock Band DLC | GW:OttW - arrcd | WLD - Thortar
Basically, major retailers are usually stable enough that they can work out relationships with suppliers based on their credit and name alone. The fact that TRU was able to do this even with their financial issues says a lot about their position in the retail market.
This comment is incredibly dismissive and ignorant in so many ways. Like, no discussion on senior vs subordinated debts, no real discussion but a bunch of Late capitalism subreddit derivative shlock
Who knows what they'll do next? Perhaps sell certificates that entitle right people to a deposit??
Hmm, I dunno, there seems to be a trend with this particular buyer.
3DS: 0473-8507-2652
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PSN: AbEntropy
No, but if one is designed in a way that makes it easy to abuse, then we should either rework it to discourage abuse, or if that's not possible, get rid of it.
You keep saying "management was bad", but that is ignoring the problem. Bain Capital isn't "bad", they're a vulture capitalist that makes their money by killing firms and selling their corpse off to the highest bidder - and they're able to do this because leveraged buyouts can be easily abused to such ends.
It seems rather deliberately misleading to use "management" to refer to Bain.
3DS: 0473-8507-2652
Switch: SW-5185-4991-5118
PSN: AbEntropy
You need to maybe tell us a bit more about your point here rather than just repeating yourself.
Remember most of us ain't got any financial background.
Your argument is a financial flavored version of "guns don't kill people." Yes, the ultimate culprit is Bain Capital, but there's a reason that they keep going back to the leveraged buyout - because it's an effective tool for what they want to do to these businesses. And they way you stop them is to make it so they are disincentivized from doing this, and one effective way would be to revise their tool so it doesn't work for that purpose anymore.
For that matter, if management is the cause, management should suffer the consequences.
Thanks to leveraged buyout and bankruptcy, everyone but management lose.
That's not a good argument for the financial tools they used to transfer wealth from the poor to the rich.
In short, how do we punish Bain Capital?
Doc: That's right, twenty five years into the future. I've always dreamed on seeing the future, looking beyond my years, seeing the progress of mankind. I'll also be able to see who wins the next twenty-five world series.
Um, wasn't management installed by the people who bought the place out? AFAIK Dave Brandon was running the show.
I am exhausted but here are my thoughts:
Someone should be paying more. Like..
I want to say that the regulatory environment has changed positively with increasing pressure against overly aggressive LBOs. I like debt structuring, I truly do, but we've put a lot of effort into restricting and stomping out potential massive fires when it comes to overleveraged buyouts. Everyone hates them. But I don't think they hate them for the right reasons.
Honestly I think PE firms are popular just because of how quickly and quietly they can make gigantic decisions and because sophisticated rich assholes have access to a special vehicle designed to cater to their tastes. I say quick and quiet relative, to say, a public company. These PE firms offer esoteric illiquid assets and they offer these ridiculous returns (altho not in this case apparently) because they don't encourage any kinda spending. It's just extra rich people savings .I'd want to start chipping away at all of those issues than trying to narrow down exactly how to regulate the 100s of moving parts on different LBOs any further.
This is where it's hard, because people suggest between something as light handed where there are material disclosures with each investment on the PE books (but then you have them being disclosed on OTHER financial statements no one reads) to as heavy handed as disallowing the deduction of interest. As for where the debt sits on the balance sheet, it's like a game of musical chairs - does the Company get to dance around the debt facility it's using to secure it's capital? Should Bain be able to push that debt down to the acquisition and not have to disclose it at all? I mean, they probably don't sit on a consolidating interest anyway, so...
edit:
like, you get stuff like this: https://www.occ.treas.gov/news-issuances/bulletins/2013/bulletin-2013-9a.pdf
guidance from the OCC but everything is still, even after many years, specifically vague
I see I see. Sorry to have misunderstood so greatly. With your knowledge on the issue, can you fill me in on a few things.
1) so, clearly the bank will be taking an enormous hit here. In any fair system they’ll be out hundreds of millions of dollars at lest. Probably billions. Should we be concerned that the bank will collapse?
2) In a fair and equitable system as we have, clearly the desperate lawsuits by LEGO and others is just frivolous nonsense. How swiftly do you expect those vendors to be paid?
3) due to the massive risk of this enormous debt shifted to toys r us, the bank must have insisted on an aggressive amount of payments on the loan principal above interest. How much did Bain manage to decrease the debt of toys r us by?
4) clearly every employee will be receiving a 100% payout on their vacation days before the bank gets a penny, when will they be paid that?
Please. I’ll stop being dismissive of Bain capitols vulture capitalism when it is more beneficial to society than a violent drug gang. Also, it’s hilarious to blame this on bad management. Bain has made millions on this deal, so has the bank. Literally everything has gone exactly as Bain capitol planned on day 1. This has been excellent management.
also, how do I not know this isn't just another ploy by management? 10 years ago the executives all got to have massive fucking incentive bonuses to stay on to help "right the ship". you see it 100 times, over and over.
the people that helped sink the ship get paid lucrative amounts to stay onboard
also @AngelHedgie financial instruments, pieces of shitty paper, are regulated more than guns.
Uh ... that is not really a very strong point dude, considering america and it's gun laws.
Financial instruments are horribly under-regulated. Just like guns. And the results of that under-regulation speaks for itself in the lives they both destroy.
Posting a solid operating profit but not paying down the principle on a loan for 80% of the value of the property should raise some huge red flags.
What do you mean a "ploy by management"? And who is the vague "management" you keep referring too? Because the way your posts read it sounds like the bad guys company in a Dollhouse remake.
What do guns have to do with anything?
The purpose of management since the buyout has been to make money for Bain capital while investing nothing in the company. They have succeeded 'admirably'
If they lose money, Bain and them also lose money. Investors in the portfolio also lose money. Do you not get how ownership works?
2005, 2017, and now in 2018 all executives got massive bonuses either paid or designed to be paid to stay on board. I'm sure you can Google this but please explain why you feel like a struggling company that couldn't pay it's debts now suddenly has the money to pay or promise to pay the executives massive bonuses.
Bain doesn't work by making money in the long term. They have one goal with businesses like TRU, sell off the parts then move onto the next business in debt etc. That's all they care about.
And I dislike this. It's a garbage business model. You make more money when the company is worth something. Normal PE firms understand this. I don't like Bain. I think Bain sucks but also the executives and those charged with government (collectively management) fucked up too.
Bain doesn't lose money from TRU going under. That's the whole point.
Corporate leadership is in a position to ensure that they get paid regardless of company performance. After all the data breaches were exposed at Equifax last year, CEO Richard Smith left the company with a $7.6M golden parachute. The same thing could be happening at TRU. Recall that TRU is a private corporation, not publicly traded. So they don't have a legal incentive to place company performance first. And they see the financial records of TRU, meaning they know when it's the best time to squeeze cash out and bail.
It is a garbage business model if you judge the business on long term success. It is not a garbage business model if your goal is to maximize short term profit, which is what Bain is doing. Bain leadership didn't "fuck up" in this case. They specifically chose to make interest only payments to the bank and run the business until it failed, at which time the bank is paid out through liquidation of the company.
I follow this: TRU balance sheet assets are depreciated to near zero. Following a bankruptcy they're repriced to be marked up to a special liquidation value from a firm. This marked up value should carry differently then what Bain and them have on their books. Not sure if it's lower, haven't done bankruptcy valuation since a pharm company. Anyway Bain then... what? gets TRU to then sell these assets for money, which is now worth more than it was (fully depreciated assets are sitting at 0) because of the bankruptcy valuation? I also imagine they get paid a management fee by the portfolio company?
How are you connection the cash flows from TRU asset sales and Bain without considering Bain as management, I guess.
And Bain probably had TRU on it's balance sheet higher in 2006 than now. That values probably sitting around that liquidation value is I mentioned before.
Just not sure if they've squeezed enough out of TRU to cover initial investment. Because structuring LBOs are not cheap, on top of all the other things Bain is required to perform with or for its portfolio assets.
Bain keeps the exorbitant amount of management feeds that they've been paid by TRU over the past 13 years. The bank gets the lion's share, if not all, of the cash from sales of TRU assets.
I don't particularly care if Bain made or lost money on TRU. What I care about was Bain's garbage business model which was and is predicated around TRU failing. You shouldn't get rewarded for running your business into the ground.
We agree. But the bank that made these loans, the LBO's term loan and revolver, probably has other banks involved. Deutsche Bank, for example, will go to other bank banks, to pool up the shitload of cash. After the deal (the Lbo) clears, they immediately tranche up and reassign that debt to other investors for cash. Like, 1,000,000 term loan only LBO sourced by Deutsche mightt have JPM, BOA, etc all having contributed 250k to loan. Those banks can immediately sell off portions of their 250k to other investors so the selling banks recognize the NPV of the loan all in 1 day
Yeah, but it doesn't matter that Deutsche Bank sells it's loan holding to another bank. The banking industry as a whole is set up not to take a loss on this transaction. The banking industry took in over 13 years approximately $400M per year ($5,200Mish in total), and then gets to sell of the business to recoup their principle. The banks, by design, cannot lose in this scenario.
Bain Capital, by design, cannot lose in this scenario.
This scenario being where they take a successful company, run it into the ground, and sell it for parts, extracting all of the value of the company as cash. And that's the problem. This does nothing to improve society in any way. It's just a mechanism for the rich to extract cash out of society and place the burden onto society.
The Banks cannot lose, I don't believe. They no longer have to write down the loan because they don't hold it. . But Bain still can, though. They still have the asset. It can still go down to zero. The individual pieces of TRU aren't worth more than the sum of it's parts. If that's the case then stripping the assets actually makes financial sense.
Would Deutsche Bank have been able to convince the other banks if they weren't allowed to move the asset off their own books, though. The value of that debt goes to zero and whoever holds it eats that loss. I think that would change the appetites of banks to invest. That's not an LBO issue, that's a debt in general issue. Is the liquidity offered by this assignment of debt worth it to society when it enables people like Bain to loot n scoot?
There's nothing worthwhile at the beginning of a liquidation sale anyway. The prices are usually marked up to even higher than they had been pre-sale so they can say that everything is 10% off and make as much or more money than they would have before. After a week, everything is 20% off. And so on.
You don't actually start seeing deals on most items until 30% or more, and even then it's only a small percentage below what the normal retail would have been. By the time you start seeing good deals on things the sale has been going on for so long and is so picked over by people who went in expecting great deals at a liquidation and refused to leave with nothing that there is very little left that you would actually want in most circumstances.
TRU, like many other big box stores, doesn't buy its stock of merchandise outright, but basically has it sent to them by manufacturers, paying when it's sold. A number of toy manufacturers, most notably The LEGO Group, filed for an injunction, because they want the unsold, unpaid stock shipped back to them, not sold at clearance prices.
Also confirmed all the Lego had been marked up even higher, so. Whoo. ;P