"I don't wanna grow up, I'm a Toys 'R' Us kid"...
Toys 'R' Us Founder Charles Lazarus Dies at 94
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Re: Toys 'R' Us Founder Charles Lazarus Dies at 94
#42Perhaps Lazarus's death in this season might presage his company's resurrection.
How so?
Re: Toys 'R' Us Founder Charles Lazarus Dies at 94
#43What poor timing, oh well he had a great life and great accomplishments during his prime. > saddled with more than $5 billion in debt Wow, I haven't yet followed the story of Toys R Us but that is a huge amount of debt. I can't imagine what severe mismanagement happened at the company to allow this. Must have had some ex-government workers managing finances (/s)... > Since Lazarus stepped down as chief executive offi…
Two words: leveraged buyout. I'm not sure what purpose they serve other than to create debt. Working at a company that was acquired by a smaller fish with a $4 billion loan, it made things painful when cuts were constantly made to pay interest on debt. Somehow, the situation benefited the shareholders that signed off on the deal.
Don Draper said it best: "Do you want to build something, or help an accountant turn a dollar into a dollar and 10 cents?"
I can say from personal experience if Blackstone buys your company you'll be focusing on the second objective.
Re: Toys 'R' Us Founder Charles Lazarus Dies at 94
#44Perhaps Lazarus's death in this season might presage his company's resurrection.
How so?
Re: Toys 'R' Us Founder Charles Lazarus Dies at 94
#45[deleted]
Re: Toys 'R' Us Founder Charles Lazarus Dies at 94
#46Just realized the phonetic connection between Lazarus and Toys 'R' Us.
Re: Toys 'R' Us Founder Charles Lazarus Dies at 94
#47Earlier quoted context omitted.
This is bizarre. I did not know that leveraged buyouts could work like this.
It's just like a mortgage. Even though it's you buying the house, it's in a way the house that ends up owning the mortgage (in many jurisdictions, you can walk away from the house and mortgage, and the bank had no leverage against your person, they can only repossess the house).
I was trying to explain what a leveraged buyout was and why a company like Toys R Us had so much debt on its books. After trying to talk through it, I used the mortgage analogy and it made a lot more sense.
Re: Toys 'R' Us Founder Charles Lazarus Dies at 94
#48Earlier quoted context omitted.
This is bizarre. I did not know that leveraged buyouts could work like this.
It's just like a mortgage. Even though it's you buying the house, it's in a way the house that ends up owning the mortgage (in many jurisdictions, you can walk away from the house and mortgage, and the bank had no leverage against your person, they can only repossess the house).
No, there the house is collateral.
In this case, instead of the lender simply taking over the acquired company, the acquired company declares bankruptcy and is liquidated.
Re: Toys 'R' Us Founder Charles Lazarus Dies at 94
#49Earlier quoted context omitted.
The morality of it depends on what you believe owners owe employees. There's clearly no objective basis there, it's down to a given person's moral beliefs. In my observation, you'll get a very different response to that from one business owner to the next. Some owners/operators take it as an intense matter of morality to safeguard their employees, others could care less and believe they owe their employees between no…
The difference here is that it's the acquired company that owes the debt, as opposed to the acquiring company owing a debt with the acquired company as collateral.
Here is how it worked:
Bain Capital decides to acquire Toys-R-Us so they set-up NewToyCo and invest $5B in it.
NewToyCo buys Toys-R-Us with that $5B and installs new managers at Toys-R-Us. Since the invested cash was investment and not a loan, NewToyCo owns Toys-R-Us free and clear
The new managers of Toys-R-Us get a $5B loan from banks secured by the assets of Toys-R-Us and pay a one time $5B dividend to shareholders of NewToyCo.
If everything goes well and Toys-R-Us can service the loan, Bain owns Toys-R-Us for free and sells it or takes it public. If things don't work out, they collected huge management consulting fees for s few years. Bain ran this exact same play on KB Toys with the same (bankruptcy) result.