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this post was submitted on 29 Sep 2025
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below is a reply to a comment I made below, pasting here as I find it crazy how this went down and is allowed.
For those curious I did a little digging. I’m on mobile so won’t be going in and out to add company names etc.
Basically, the private equity firms got together and said let’s buy Toy R Us for $6.6B but we only want to use say 300M of our own money and get a loan for the rest.
Then they bought Toys R Us but made them sell all assets to equity firms which then leased them back to Toys R Us so they could pay back the loans. This means Toys R Us are paying hundreds of million a year to cover loans and can’t put that money into making a better business.
The private equity firms also made Toys R Us issue dividends in the hundreds of millions so private equity can make money.
In the end private equity walked away with over $1B in profit whilst Toys R Us declared bankruptcy with $5B still left to pay.
What a fucking insane system. Like how many people lost their jobs so these ghouls could make some extra cash off its downfall.
And people think I’m crazy for making my life harder by not shopping at places like Amazon or being a pirate and not giving money to Netflix etc.
I feel I am living in crazy land. Like the Uk has all our pensions and shit tied to the damn stock market, ensuring we can never really leave this system.
What I don't understand about the whole thing is who ends up holding the bag of all that debt?
Like banks that lend them billions must be intelligent enough to know how private equity takeovers like this work. So if they lend them money, they surely would want to get that off their books asap. But who do they sell it to? I can't imagine there is any type of reinsurance for this, since insurance providers should know even better.
I imagine some of the debt is to employees and small contractors, but can that really account for such a massive sum?
Companies are valued by earnings-per-share, independent of the assets. So if the P/E ratio is too low the company costs less than its assets and it pays off to sell the parts.
https://en.m.wikipedia.org/wiki/Price%E2%80%93earnings_ratio
In this case I heard a rumor that Amazon did it to dominate the toy market, so losses could have been acceptable.
I certainly would not put it past them.