Over a dozen members of Congress just sent an official letter to the private equity firm that owns Toys ‘R’ Us, asking why its loading the company down with debt while firing approximately 33,000 workers.
Ever since filing for chapter 11 bankruptcy in 2017, Toys ‘R’ Us has been steadily shuttering its stores across the United States, Canada, and the United Kingdom in order to deal with $5 billion in long-term debt owed to its private equity owners, Bain Capital and KKR & Co.
However, after the company announced it was closing all of its U.S. stores, in addition to not paying any severance packages to tens of thousands of employees laid off from the closings, the Congressional Progressive Caucus sent a formal letter of inquiry to Bain and KKR.
“Leveraged buyouts—such as those facilitated by your companies—often result in mass job loss, closure of profitable businesses, and unnecessary financial burdens for local government. Such buyouts harm communities, while investment managers walk away with significant gains,” the letter read. “In fact, due to the closure of Toys ‘R Us, 33,000 workers lost their jobs, while your firms have extracted over $500 million from Toys ‘R Us during the period you have owned the company.”
The letter, which was co-signed by high-profile members of Congress and the Senate including Reps. Keith Ellison (D-Minnesota), Raul Grijalva (D-Arizona), Mark Pocan (D-Wisconsin), and Senator Bernie Sanders (I-Vermont), bluntly asked the heads of Bain and KKR whether or not it was their intent to load Toys ‘R’ Us down with debt, as well as whether or not the company got anything in return for hundreds of millions of dollars it gave to its private equity owners and whether or not longtime employees will be given severance pay.
“The consequences of leveraged buyouts are exemplified by the plight of the workers at Toys ‘R Us—from front-line sales associates to clerks, managers and executives—who have been left with nothing. Many have worked for the company for decades and rely on the company to support their families,” the letter read. “We are concerned that your investment firms have deliberately chosen this path for the company, its workers and its communities.”
Congressional representatives are giving Toys ‘R’ Us owners a deadline of July 15 to respond to their inquiry.
Logan Espinoza is a freelance contributor specializing in economic issues. He lives in Phoenix, Arizona with his wife and daughter. Contact him at logan DOT espinoza AT yahoo DOT com.