Employees ask: “How can they walk away with millions and leave workers with zero?”
Toys R Us isn’t paying severance to its 30,000 workers who will lose their jobs as the retailer shuts down, even though it paid out millions in executive bonuses a week before it filed for bankruptcy. Workers are calling on lawmakers to create new rules that would require bankrupt companies backed by private-equity firms to provide compensation to their workers.
As reported by the Washington Post, more than a dozen workers met with lawmakers in New Jersey late last week, where Toys R Us is based, to push for severance pay. Workers also called for new regulations on leveraged buyouts, as well as windfall taxes that would prevent private-equity firms from running a business into the ground and then walking away with huge sums of money.
In addition to meeting with lawmakers, employees are preparing to file a claim in bankruptcy court asking that they be fairly compensated, according to workers’ advocates at the Center for Popular Democracy.
“This is the story of a company — one of the most iconic in America — that was saddled with so much debt that it could not succeed,” Sen. Cory Booker was quoted as saying at an event in the parking lot of a Toys R Us New Jersey. “And now the big guys are walking away and the workers are left with nothing.”
Toys R Us filed for bankruptcy last year, citing $7.9b in debt against $6.6b in assets, and announced in March that it would close all 800 of its US stores.
On Friday, Booker and other New Jersey lawmakers submitted a letter to the heads of those firms, urging them to “do right by the company’s workers.”
Tracy Auerbach, a store manager in Chandler, Arizona, who has been working at the company for 31 years, commented: “I have always been proud to work at Toys R Us, but this is not Toys R Us — this is KKR and Bain Capital. This is Wall Street greed. How can they walk away with millions and leave 33,000 workers with zero?”
Last year, Toys R Us awarded executives $8m in bonuses a week before filing for bankruptcy. A few months later, the company got approval from a bankruptcy judge to pay up to $21m in additional bonuses to executives if they met certain performance goals. (That money was never awarded because the company’s performance fell short.) Chief executive Dave Brandon received $11.25m in compensation last year.
Financial filings show that Toys R Us was handing over $400m a year to pay back its debt, often at the expense of turning a profit. Recently, it was burning through $50m to $100m in cash each month as it tried to dig its way out, according to court documents filed in March. The retailer also paid $470m in advisory fees, interest and other payments to Bain Capital, KKR and Vornado since 2005.
The firms did not respond to requests for comment.