Of all the sad things to end, I think Toys'R'us has to be up there.
Twice yearly visits for xmas and birthdays are still core memories I remember with joy. That place was magical when I was a kid.
But I didn't realise how they went out of the business, I thought maybe it was amazon and people's shopping habits changing etc - until this 4-minute clip popped up ~
https://www.youtube.com/watch?v=_e5w62j5u2w
I get we have the free market and all that, but I don't think stuff like this should even be possible. This is some peak disgusting fiat behavior
For those who don't want to watch, here's the gpt summary
🔧 1. Leveraged Buyout (LBO) With Minimal Risk
A private equity firm acquired Toys “R” Us through a leveraged buyout.
They put in very little of their own money (e.g., $3M), borrowed the rest ($97M), and made Toys “R” Us itself responsible for the debt.
The company went from being profitable and debt-free to being burdened with massive debt overnight.
💸 2. Extracting Fees Through Self-Dealing
The PE firm appointed themselves as advisors, managers, and consultants to Toys “R” Us.
They charged millions in monthly "advisory" fees, effectively siphoning cash out of the business.
They recovered their original investment almost immediately through these internal payments.
🏬 3. Asset Stripping
They sold off the company’s valuable real estate, including land under its stores, to a related real estate firm they also owned.
Then they leased it back to Toys “R” Us at inflated rates, creating new monthly rent liabilities.
This turned formerly owned assets into expensive obligations.
🚛 4. Liquidating Physical Infrastructure
They sold off:
Warehouses (essential for stock resilience)
Trucking fleet (used for distribution)
Extra inventory (used to survive downturns)
Then rented everything back, draining operational capacity and cash reserves.
📉 5. Cutting Staff & Operations
They laid off large portions of the workforce.
Despite these cuts, the financial burden from debt, rent, and advisory fees continued.
💀 6. No Assets Left to Survive
When economic conditions worsened:
Toys “R” Us had no real estate, no fleet, no inventory buffers, and no cash reserves left.
They couldn’t leverage or collateralize anything to stay afloat.
🧨 7. Bankruptcy & Fire Sale
Eventually, Toys “R” Us couldn’t make debt payments and filed for bankruptcy.
U.S. taxpayers and employees were left with the fallout.
The remaining valuable assets (mostly intellectual property) were sold at a steep discount to another private equity affiliate.
⚠️ Summary:
Private equity loaded Toys “R” Us with debt, drained it of assets and cash via self-serving contracts, stripped its infrastructure, and left it unable to weather downturns — leading to its collapse.
