Guys, this isn't the aquaponics thread. Also, the aquaponics thread doesn't exist, though it seems it's an interesting enough subject to sustain the attention of several people here.
I wouldn't deny that TRU was screwed over and had their life cut short. But I doubt they were long for this world anyway.
Basically. Healthy companies don't become victims of leveraged buyouts because they know where that leads.
If shareholders vote to sell ten there's nothing a healthy company can do.
Shareholders and shareholder elected boards first priority is the stock price, which is based on perception and opportunity in the stock market, not the actual performance or operation of the company.
This is the downside of having an IPO that companies rarely consider while that fat cash is rolling in. It's like selling your car to somebody and trusting you'll still get to drive it. Some day that guy will get a good offer from a scrap dealer and send it to the crusher with you still inside.
It doesn't matter that the car is still fine and drivable, the guy has just bowed to the market perception that he would have more money right now if he sold it out from under you and went to buy some other guy's car.
Well, that was depressing. My store broke the seal on Lego and American Girl.
Even at 10%, both sections were gutted.
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AthenorBattle Hardened OptimistThe Skies of HiigaraRegistered Userregular
One of the big questions I have is, will they continue to ship their warehouse inventory out to stores to clear that out as well? That's supposedly where a lot of their assets are, and it will dictate if I continue hunting there in the coming weeks.
Toxic ToysAre you really taking my advice?Really?Registered Userregular
I went to both of the stores new me. At the nice store your wouldn't know it was going out of business. The older store was had the big going out of business sign on the front of the store. It was still way more then half full of toys. Almost everything was at the 50% off stage and all the really cool stuff was gone. Except for Legos, those were still full price. I was a little surprised they still had a lot of Star Wars toys but no Transformers.
3DS code: 2938-6074-2306, Nintendo Network ID: ToxicToys, PSN: zutto
One of the big questions I have is, will they continue to ship their warehouse inventory out to stores to clear that out as well? That's supposedly where a lot of their assets are, and it will dictate if I continue hunting there in the coming weeks.
Well, I definitely noticed some new things on the shelf that I didn’t see like 10 days ago.
I went to both of the stores new me. At the nice store your wouldn't know it was going out of business. The older store was had the big going out of business sign on the front of the store. It was still way more then half full of toys. Almost everything was at the 50% off stage and all the really cool stuff was gone. Except for Legos, those were still full price. I was a little surprised they still had a lot of Star Wars toys but no Transformers.
I imagine at least some of the products aren't bought wholesale, but placed by vendors who pay slotting fees. In those cases, the vendors own the product and will get to remove it when the store closes, so they don't necessarily need to take part in the clearance.
Alternately, they could be doing what Sears/K-Mart has done in my area - popular items don't get deep discounts in closing stores, because they can be moved to other stores instead. The Sears in my city has the actual DVD rack from the K-Mart in Bay City now, signs unchanged and smaller Sears price tags slapped over the K-Mart ones. Because right now, TRU is still operating on a plan to close some stores but not all of them. Later this week when the company gets permission to start clearancing all their stores instead of just the 200 already on the chopping block, that plan changes and items they planned to dump on remaining stores would start getting discounted.
I wouldn't deny that TRU was screwed over and had their life cut short. But I doubt they were long for this world anyway.
Basically. Healthy companies don't become victims of leveraged buyouts because they know where that leads.
If shareholders vote to sell ten there's nothing a healthy company can do.
The argument you can make is that management did not see, or did not care about, how lethal the potential of a leveraged buyout is (as opposed to a simple hostile takeover where another company purchases you but often wishes to continue operating the company)
In a hostile takeover, there is often severe risks to management, who may see their jobs eliminated immediately after the takeover. In a leveraged buyout, management sees no immediate changes, because the purchasing 'company' usually has no experience running a similar company. But in the long term, the company is almost always destroyed.
So, a responsible management team should see that a fraction of profits should always go towards stock buybacks to keep the company safe from predatory acquisition. I imagine the miscalculation was that the level were the company is undesirable for a hostile takeover is lower than the level where the company is undesirable for a leveraged buyout. Effectively in todays operating environment you MUST keep the share value of a profit making company higher than the total amount of revenue which could be raised from the sale of all company assets.
So you have to keep profits relatively high, and use those funds to do stock buybacks and pay dividends such that the profits are a big part of your corporate valuation. Toys R US probably issued too much stock, and didn't use enough profits for buybacks.
I wouldn't deny that TRU was screwed over and had their life cut short. But I doubt they were long for this world anyway.
Basically. Healthy companies don't become victims of leveraged buyouts because they know where that leads.
If shareholders vote to sell ten there's nothing a healthy company can do.
The argument you can make is that management did not see, or did not care about, how lethal the potential of a leveraged buyout is (as opposed to a simple hostile takeover where another company purchases you but often wishes to continue operating the company)
In a hostile takeover, there is often severe risks to management, who may see their jobs eliminated immediately after the takeover. In a leveraged buyout, management sees no immediate changes, because the purchasing 'company' usually has no experience running a similar company. But in the long term, the company is almost always destroyed.
So, a responsible management team should see that a fraction of profits should always go towards stock buybacks to keep the company safe from predatory acquisition. I imagine the miscalculation was that the level were the company is undesirable for a hostile takeover is lower than the level where the company is undesirable for a leveraged buyout. Effectively in todays operating environment you MUST keep the share value of a profit making company higher than the total amount of revenue which could be raised from the sale of all company assets.
So you have to keep profits relatively high, and use those funds to do stock buybacks and pay dividends such that the profits are a big part of your corporate valuation. Toys R US probably issued too much stock, and didn't use enough profits for buybacks.
Huh? Many of the hostile takeovers of the 1980s were leveraged buyouts. All the term "hostile takeover" means is that the purchase was done in opposition to the will of a corporation's management - and knowing that the intent of a buyer is to gut a company is a good way to put the corporate management in opposition.
Blows my mind that there are people who have been to a Toys-R-Us twice in 10 days.
There's a Toys R Us across the street from me at my workplace. Obviously, it's going to close down soon, but I'd go in there about once a month to get the odd birthday present or pick up a random desk tchotchke or something.
I wouldn't deny that TRU was screwed over and had their life cut short. But I doubt they were long for this world anyway.
Basically. Healthy companies don't become victims of leveraged buyouts because they know where that leads.
If shareholders vote to sell ten there's nothing a healthy company can do.
The argument you can make is that management did not see, or did not care about, how lethal the potential of a leveraged buyout is (as opposed to a simple hostile takeover where another company purchases you but often wishes to continue operating the company)
In a hostile takeover, there is often severe risks to management, who may see their jobs eliminated immediately after the takeover. In a leveraged buyout, management sees no immediate changes, because the purchasing 'company' usually has no experience running a similar company. But in the long term, the company is almost always destroyed.
So, a responsible management team should see that a fraction of profits should always go towards stock buybacks to keep the company safe from predatory acquisition. I imagine the miscalculation was that the level were the company is undesirable for a hostile takeover is lower than the level where the company is undesirable for a leveraged buyout. Effectively in todays operating environment you MUST keep the share value of a profit making company higher than the total amount of revenue which could be raised from the sale of all company assets.
So you have to keep profits relatively high, and use those funds to do stock buybacks and pay dividends such that the profits are a big part of your corporate valuation. Toys R US probably issued too much stock, and didn't use enough profits for buybacks.
Huh? Many of the hostile takeovers of the 1980s were leveraged buyouts. All the term "hostile takeover" means is that the purchase was done in opposition to the will of a corporation's management - and knowing that the intent of a buyer is to gut a company is a good way to put the corporate management in opposition.
I guess I'm more discriminating between the 'purpose' of a the hostile takeover than whether it is hostile or not.
This Toys R Us leveraged buyout takeover is a profits and assets hijacking. The inbound team likely doesn't care about how or who runs the company, providing they don't spend any money. So the management team may well be kept on, as will the workers, but only until the company inevitably collapses.
A hostile takeover in the more 'classic' style is usually done because someone either...
1) Wants IP (management at greatest risk. Workers have a decent chance of staying on for a while, or internally transferring to the acquirer)
2) Thinks they can run the company more effectively than current management (management loses jobs immediately)
3) Wishes to eliminate a competitor (everyone loses jobs immediately)
In these examples, there is an immediate risk to all jobs, and in #2 management can expect to be eliminated entirely, but the risk/reward for the acquirer is different. In #3 you need to keep track of the cash piles of your competitors. If you have no big ones then you are secure. Toys R Us doesn't have IP, so they are OK there. So the only one management was likely worried about is #2. Is there someone out there who thinks they can run the company as a real and going concern better than us. And I'm sure they looked at their stock price and said, "Nope, when you look at our valuation and debts, I don't think anyone would want to stage a hostile takeover and keep running us"
And they were right, but their price needed to be HIGHER than that, so that they could say "I don't think anyone would want to buy us, engage in a decade of profit taking, and then rely on US bankruptcy laws and resale of our assets to recoup a loan principal"
"That is cool" - Abraham Lincoln
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Toxic ToysAre you really taking my advice?Really?Registered Userregular
Never really had nostalgia for TRU, for me it was mostly KB Toys because they used to have one in every mall around me when growing up.
I had nostalgia for KB Toys, but I also remember it being a bit of a shithole, with toys littered on the ground and toddlers running around screaming.
I agree with that. It felt like KB was the ghetto version of Toys R Us. As a kid I could go to KB any time I was at the mall, but Toys R Us was a event, a special trip. Just toys, no pants or underwear.
3DS code: 2938-6074-2306, Nintendo Network ID: ToxicToys, PSN: zutto
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KetarCome on upstairswe're having a partyRegistered Userregular
Never really had nostalgia for TRU, for me it was mostly KB Toys because they used to have one in every mall around me when growing up.
I had nostalgia for KB Toys, but I also remember it being a bit of a shithole, with toys littered on the ground and toddlers running around screaming.
I agree with that. It felt like KB was the ghetto version of Toys R Us. As a kid I could go to KB any time I was at the mall, but Toys R Us was a event, a special trip. Just toys, no pants or underwear.
I never got to go to Toys R Us without pants or underwear when I was a kid.
Never really had nostalgia for TRU, for me it was mostly KB Toys because they used to have one in every mall around me when growing up.
I had nostalgia for KB Toys, but I also remember it being a bit of a shithole, with toys littered on the ground and toddlers running around screaming.
I agree with that. It felt like KB was the ghetto version of Toys R Us. As a kid I could go to KB any time I was at the mall, but Toys R Us was a event, a special trip. Just toys, no pants or underwear.
I remember KB being a good store, but smaller than Toys R Us. Higher shelves, and fewer big items like bikes and the like.
And I'm guessing the toys littering the floors in Hahnsoo1's memory probably corresponded to the toddlers running around. Can't really blame the store for parents treating it like a daycare.
It might have been a lower tier of store in my memory, but that's because it wasn't as special an event to go to KB. It was parents needed to hit the mall for school clothes or new shoes or a new appliance or something and I got to wander off while they shopped. Wandering off meant the arcade (until it closed) the KB (until it closed) or the Walden's Books (until... you get the idea). A little different then going to a department store and wandering the toy section. But, like you said, going to a Toys R Us meant that it was the main event, and that didn't happen with nearly the regularity.
Biggest thing I remember about KB was they always had the same sliding toy kind of thing set up at the front. It would drag little figures up a staircase to the top of a slide then they'd slide back down to the bottom of the steps. That chk-chk-chk-ssssss-click sound is permanently ingrained in my mind, right next to "No, you can't get that, put it back" and the smell of Cinnabon.
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AthenorBattle Hardened OptimistThe Skies of HiigaraRegistered Userregular
We have our dates.
May 14th is the target closing date. Liquidation sales begin on Thursday.
The company that now owns the KB Toys name sees the product shipping void left by Toys R Us' death as their chance to get KB Toys back into the game - for a little while, at least.
Strategic Marks, a company that buys and revitalizes defunct brands, owns the KB name and plans to open 1,000 pop-up KB Toys stores for Black Friday and the holiday shopping season.
"My assumption is that there's about half a billion dollars worth of toys that have been produced for Toys "R" Us with no place to go," said Strategic Marks president Ellia Kassoff, in a phone interview with CNNMoney. "That's a big, big void that we're hoping to fill up."
Toys "R" Us, which filed for bankruptcy last year, announced last week that it expects to close all of its 735 stores in the US. Those closures will put 31,000 people out of work and hurt toy manufacturers that depended on the national retailer for distribution.
Kassoff said he's been in contact with Hasbro Inc. and Mattel, Inc. and up to 200 smaller toy suppliers who are looking for new brick and mortar retailers. He said he plans to take advantage of a glut of toy manufacturers that have inventory but no place to sell it.
To get a quick retail footprint, Kassoff said he's working with companies that specialize in holiday and pop-up retail, like Spencer Spirit Holdings Inc., Go! Retail Group, and Party City Holdco Inc.
"We're talking to companies that know how to do it, they have a methodology, they're used to rolling out stuff real quickly," he said.
After the holiday shopping season ends, Kassoff will decide which of the pop-up stores will become permanent, based on their performance and whether he can negotiate a lease.
Strategic Marks bought the KB Toys brand from Bain Capital in 2016. Bain is the same company that bought Toys "R" Us and took it private in 2006, a process that left the toy company saddled with $5.3 billion in debt, from which it never recovered.
The company that now owns the KB Toys name sees the product shipping void left by Toys R Us' death as their chance to get KB Toys back into the game - for a little while, at least.
Strategic Marks, a company that buys and revitalizes defunct brands, owns the KB name and plans to open 1,000 pop-up KB Toys stores for Black Friday and the holiday shopping season.
"My assumption is that there's about half a billion dollars worth of toys that have been produced for Toys "R" Us with no place to go," said Strategic Marks president Ellia Kassoff, in a phone interview with CNNMoney. "That's a big, big void that we're hoping to fill up."
Toys "R" Us, which filed for bankruptcy last year, announced last week that it expects to close all of its 735 stores in the US. Those closures will put 31,000 people out of work and hurt toy manufacturers that depended on the national retailer for distribution.
Kassoff said he's been in contact with Hasbro Inc. and Mattel, Inc. and up to 200 smaller toy suppliers who are looking for new brick and mortar retailers. He said he plans to take advantage of a glut of toy manufacturers that have inventory but no place to sell it.
To get a quick retail footprint, Kassoff said he's working with companies that specialize in holiday and pop-up retail, like Spencer Spirit Holdings Inc., Go! Retail Group, and Party City Holdco Inc.
"We're talking to companies that know how to do it, they have a methodology, they're used to rolling out stuff real quickly," he said.
After the holiday shopping season ends, Kassoff will decide which of the pop-up stores will become permanent, based on their performance and whether he can negotiate a lease.
Strategic Marks bought the KB Toys brand from Bain Capital in 2016. Bain is the same company that bought Toys "R" Us and took it private in 2006, a process that left the toy company saddled with $5.3 billion in debt, from which it never recovered.
It's...a pretty good plan. KB Toys has cachet as well, and using the pop up stores as a soft launch would work well in figuring out viability.
The company that now owns the KB Toys name sees the product shipping void left by Toys R Us' death as their chance to get KB Toys back into the game - for a little while, at least.
Strategic Marks, a company that buys and revitalizes defunct brands, owns the KB name and plans to open 1,000 pop-up KB Toys stores for Black Friday and the holiday shopping season.
"My assumption is that there's about half a billion dollars worth of toys that have been produced for Toys "R" Us with no place to go," said Strategic Marks president Ellia Kassoff, in a phone interview with CNNMoney. "That's a big, big void that we're hoping to fill up."
Toys "R" Us, which filed for bankruptcy last year, announced last week that it expects to close all of its 735 stores in the US. Those closures will put 31,000 people out of work and hurt toy manufacturers that depended on the national retailer for distribution.
Kassoff said he's been in contact with Hasbro Inc. and Mattel, Inc. and up to 200 smaller toy suppliers who are looking for new brick and mortar retailers. He said he plans to take advantage of a glut of toy manufacturers that have inventory but no place to sell it.
To get a quick retail footprint, Kassoff said he's working with companies that specialize in holiday and pop-up retail, like Spencer Spirit Holdings Inc., Go! Retail Group, and Party City Holdco Inc.
"We're talking to companies that know how to do it, they have a methodology, they're used to rolling out stuff real quickly," he said.
After the holiday shopping season ends, Kassoff will decide which of the pop-up stores will become permanent, based on their performance and whether he can negotiate a lease.
Strategic Marks bought the KB Toys brand from Bain Capital in 2016. Bain is the same company that bought Toys "R" Us and took it private in 2006, a process that left the toy company saddled with $5.3 billion in debt, from which it never recovered.
It's...a pretty good plan. KB Toys has cachet as well, and using the pop up stores as a soft launch would work well in figuring out viability.
I know I would go to a KB if it popped up around me. But I go check out any holiday pop up store round me that I see.
3DS code: 2938-6074-2306, Nintendo Network ID: ToxicToys, PSN: zutto
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FencingsaxIt is difficult to get a man to understand, when his salary depends upon his not understandingGNU Terry PratchettRegistered Userregular
It is nice to see the reason for TRU's demise repeated at least somewhat.
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Giggles_FunsworthBlight on DiscourseBay Area SprawlRegistered Userregular
It's beautiful. And then in 15 years after somebody's done a leveraged buyout and killed KB Toys again they can revitalize Toys R Us.
Leveraged buy outs typically have the private equity company marking the company they used to buyout a company putting it on their balance sheet. These will typically use some type of fair value methodology as required by GAAP. Any reduction in the portfolio asset - other companies they financed - is felt on the holding company and the investors.
Leveraged buy outs are actually quite awesome but when you take a risk like that and when the parent companies no longer want to be signed on as second parties to any other debt facilities, then you have this. I've seen private loans from the PE companies to the investment companies to help them through refinancing
Leveraged buy outs, or debt in itself, is usually a more cost effective option for financing large purchases like this.
So blame management for being shit at supporting their investment, not blaming some supposedly esoteric method of financing.
Leveraged buy outs typically have the private equity company marking the company they used to buyout a company putting it on their balance sheet. These will typically use some type of fair value methodology as required by GAAP. Any reduction in the portfolio asset - other companies they financed - is felt on the holding company and the investors.
Leveraged buy outs are actually quite awesome but when you take a risk like that and when the parent companies no longer want to be signed on as second parties to any other debt facilities, then you have this. I've seen private loans from the PE companies to the investment companies to help them through refinancing
Leveraged buy outs, or debt in itself, is usually a more cost effective option for financing large purchases like this.
So blame management for being shit at supporting their investment, not blaming some supposedly esoteric method of financing.
I'm sorry, but when there's a pattern of this (just look at the history of leveraged buyouts), the problem is the system. Even if the issue is that it's being abused, then there's ample evidence that it's too easy to abuse, and as such should be restructured to make abuse more difficult.
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.
What happened to TRU was not a failure, because that would imply that the planned goal was to right the ship. That was never in the game plan, as we can see from the trail of misery that Bain Capital has left behind. The endgame was always the gutting of TRU, where the banks and the PE firms make out like bandits, and the employees are left holding the bag.
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.
Any news on the potential sales that start tomorrow? I can't find anything really about actual discounts and whatnot. I assume it won't be worth taking a trip to one or two stores.
More than 50 suppliers, including Barbie maker Mattel (MAT.O) and Lego, have objected in some form to the proceedings by the storied toy retailer to liquidate its U.S. business, putting 30,000 jobs at risk.
Some trade vendors are demanding the company return any unpaid inventory rather than selling it and using going out of business sales to pay secured lenders and bankruptcy lawyers, at their cost, court papers showed.
It is also seeking approval for a series of U.S. liquidation procedures including a halt to more than $450 million in supplier payments as part of a plan that experts told Reuters could cause many small toy makers to disappear.
Under trade agreements, vendors were required to ship goods to Toys ‘R’ Us on unsecured trade credit.
In a court filing, Lego said any “wind-down must be implemented in a manner that is fair and equitable to all” of the company’s creditors.
The U.S. Trustee, a bankruptcy watchdog, has also objected, saying that while it is “resigned” to the company’s future, it is concerned about certain of the procedures and relief proposed as part of the liquidation.
Toxic ToysAre you really taking my advice?Really?Registered Userregular
edited March 2018
I love a getting stuff cheap, but I would rather they have to send back unpaid for stock before trying to sell off. Fuck the banks if they can't get paid by selling what Toys R Us actually owns.
Toxic Toys on
3DS code: 2938-6074-2306, Nintendo Network ID: ToxicToys, PSN: zutto
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AthenorBattle Hardened OptimistThe Skies of HiigaraRegistered Userregular
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?
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?
The store has a massive historical advantage over the toymakers. It is very typical that the stock be 'loaned' to toys r us, and then the toymaker only gets its cut when the sale is made.
Making these pseudo legal bankruptcy sales is pretty much why the bank is here in the first place though, so expect them to not move an inch, and for this collapse to kill a lot of small toy brands. Whose failure will of course be blamed on...
1) Chinese knock offs
2) Amazon
3) Kids today and their stupid iPads!
So I’ve never been in a TRU because there wasn’t one around me as a kid (but I still got Moon Shoes one year for Christmas!), but this whole thing has made me sad. My wife and I are going to go to the local one here tomorrow night to look at the deals. Their sales are supposed to start tomorrow.
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AthenorBattle Hardened OptimistThe Skies of HiigaraRegistered Userregular
Tomorrow's gonna be a mad house. I feel so bad for the employees.
I feel like the main thing I would go out for are giftcards (I doubt those get discounted), games, PS4, and Legos. I feel like most of that stuff won't be hit with huge sales.
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Shareholders and shareholder elected boards first priority is the stock price, which is based on perception and opportunity in the stock market, not the actual performance or operation of the company.
This is the downside of having an IPO that companies rarely consider while that fat cash is rolling in. It's like selling your car to somebody and trusting you'll still get to drive it. Some day that guy will get a good offer from a scrap dealer and send it to the crusher with you still inside.
It doesn't matter that the car is still fine and drivable, the guy has just bowed to the market perception that he would have more money right now if he sold it out from under you and went to buy some other guy's car.
Even at 10%, both sections were gutted.
Well, I definitely noticed some new things on the shelf that I didn’t see like 10 days ago.
So...maybe?
I imagine at least some of the products aren't bought wholesale, but placed by vendors who pay slotting fees. In those cases, the vendors own the product and will get to remove it when the store closes, so they don't necessarily need to take part in the clearance.
Alternately, they could be doing what Sears/K-Mart has done in my area - popular items don't get deep discounts in closing stores, because they can be moved to other stores instead. The Sears in my city has the actual DVD rack from the K-Mart in Bay City now, signs unchanged and smaller Sears price tags slapped over the K-Mart ones. Because right now, TRU is still operating on a plan to close some stores but not all of them. Later this week when the company gets permission to start clearancing all their stores instead of just the 200 already on the chopping block, that plan changes and items they planned to dump on remaining stores would start getting discounted.
Part discussing the nostalgia factor, part giving a high level overview of the LBO gooseshit that led to here.
The argument you can make is that management did not see, or did not care about, how lethal the potential of a leveraged buyout is (as opposed to a simple hostile takeover where another company purchases you but often wishes to continue operating the company)
In a hostile takeover, there is often severe risks to management, who may see their jobs eliminated immediately after the takeover. In a leveraged buyout, management sees no immediate changes, because the purchasing 'company' usually has no experience running a similar company. But in the long term, the company is almost always destroyed.
So, a responsible management team should see that a fraction of profits should always go towards stock buybacks to keep the company safe from predatory acquisition. I imagine the miscalculation was that the level were the company is undesirable for a hostile takeover is lower than the level where the company is undesirable for a leveraged buyout. Effectively in todays operating environment you MUST keep the share value of a profit making company higher than the total amount of revenue which could be raised from the sale of all company assets.
So you have to keep profits relatively high, and use those funds to do stock buybacks and pay dividends such that the profits are a big part of your corporate valuation. Toys R US probably issued too much stock, and didn't use enough profits for buybacks.
Huh? Many of the hostile takeovers of the 1980s were leveraged buyouts. All the term "hostile takeover" means is that the purchase was done in opposition to the will of a corporation's management - and knowing that the intent of a buyer is to gut a company is a good way to put the corporate management in opposition.
I guess I'm more discriminating between the 'purpose' of a the hostile takeover than whether it is hostile or not.
This Toys R Us leveraged buyout takeover is a profits and assets hijacking. The inbound team likely doesn't care about how or who runs the company, providing they don't spend any money. So the management team may well be kept on, as will the workers, but only until the company inevitably collapses.
A hostile takeover in the more 'classic' style is usually done because someone either...
1) Wants IP (management at greatest risk. Workers have a decent chance of staying on for a while, or internally transferring to the acquirer)
2) Thinks they can run the company more effectively than current management (management loses jobs immediately)
3) Wishes to eliminate a competitor (everyone loses jobs immediately)
In these examples, there is an immediate risk to all jobs, and in #2 management can expect to be eliminated entirely, but the risk/reward for the acquirer is different. In #3 you need to keep track of the cash piles of your competitors. If you have no big ones then you are secure. Toys R Us doesn't have IP, so they are OK there. So the only one management was likely worried about is #2. Is there someone out there who thinks they can run the company as a real and going concern better than us. And I'm sure they looked at their stock price and said, "Nope, when you look at our valuation and debts, I don't think anyone would want to stage a hostile takeover and keep running us"
And they were right, but their price needed to be HIGHER than that, so that they could say "I don't think anyone would want to buy us, engage in a decade of profit taking, and then rely on US bankruptcy laws and resale of our assets to recoup a loan principal"
I agree with that. It felt like KB was the ghetto version of Toys R Us. As a kid I could go to KB any time I was at the mall, but Toys R Us was a event, a special trip. Just toys, no pants or underwear.
I never got to go to Toys R Us without pants or underwear when I was a kid.
And now I never will.
I remember KB being a good store, but smaller than Toys R Us. Higher shelves, and fewer big items like bikes and the like.
And I'm guessing the toys littering the floors in Hahnsoo1's memory probably corresponded to the toddlers running around. Can't really blame the store for parents treating it like a daycare.
It might have been a lower tier of store in my memory, but that's because it wasn't as special an event to go to KB. It was parents needed to hit the mall for school clothes or new shoes or a new appliance or something and I got to wander off while they shopped. Wandering off meant the arcade (until it closed) the KB (until it closed) or the Walden's Books (until... you get the idea). A little different then going to a department store and wandering the toy section. But, like you said, going to a Toys R Us meant that it was the main event, and that didn't happen with nearly the regularity.
Biggest thing I remember about KB was they always had the same sliding toy kind of thing set up at the front. It would drag little figures up a staircase to the top of a slide then they'd slide back down to the bottom of the steps. That chk-chk-chk-ssssss-click sound is permanently ingrained in my mind, right next to "No, you can't get that, put it back" and the smell of Cinnabon.
May 14th is the target closing date. Liquidation sales begin on Thursday.
http://money.cnn.com/2018/03/20/news/companies/kb-toys-toys-r-us/index.html
It's...a pretty good plan. KB Toys has cachet as well, and using the pop up stores as a soft launch would work well in figuring out viability.
I know I would go to a KB if it popped up around me. But I go check out any holiday pop up store round me that I see.
RIP TRU
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Leveraged buy outs are actually quite awesome but when you take a risk like that and when the parent companies no longer want to be signed on as second parties to any other debt facilities, then you have this. I've seen private loans from the PE companies to the investment companies to help them through refinancing
Leveraged buy outs, or debt in itself, is usually a more cost effective option for financing large purchases like this.
So blame management for being shit at supporting their investment, not blaming some supposedly esoteric method of financing.
I'm sorry, but when there's a pattern of this (just look at the history of leveraged buyouts), the problem is the system. Even if the issue is that it's being abused, then there's ample evidence that it's too easy to abuse, and as such should be restructured to make abuse more difficult.
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.
What happened to TRU was not a failure, because that would imply that the planned goal was to right the ship. That was never in the game plan, as we can see from the trail of misery that Bain Capital has left behind. The endgame was always the gutting of TRU, where the banks and the PE firms make out like bandits, and the employees are left holding the bag.
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.
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https://www.reuters.com/article/us-toys-r-us-bankruptcy/toys-r-us-says-making-every-effort-to-pay-vendors-idUSKBN1GW1Q4
The store has a massive historical advantage over the toymakers. It is very typical that the stock be 'loaned' to toys r us, and then the toymaker only gets its cut when the sale is made.
Making these pseudo legal bankruptcy sales is pretty much why the bank is here in the first place though, so expect them to not move an inch, and for this collapse to kill a lot of small toy brands. Whose failure will of course be blamed on...
1) Chinese knock offs
2) Amazon
3) Kids today and their stupid iPads!
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america is bad.