Workers from Toys “R” Us stores across America set up a mock graveyard in the New York City lobby of private-equity giant Bain Capital on Monday. The gravestones read “Toys R Us: 1957-2018” and “Here Lies Geoffrey [the Toys “R” Us mascot], Killed by Wall Street Greed.” Alicia Henson of Lexington, Kentucky, a pregnant woman holding a child in her arms, began to speak about her time with the company. She was jostled by a security guard attempting to shut down the protest. After other workers separated them, Cheryl Claude of South River, New Jersey, took the megaphone.
“Thirty-three years of giving my life for this company, and you guys are taking everything away from every one of us. You guys ought to be ashamed of yourselves.”
The Bain Capital protest was part of a series of actions demanding a modicum of dignity from financiers who drove Toys “R” Us into the ground. All 735 Toys “R” Us stores in America will be closing by the end of June, and 33,000 workers will not only lose their jobs; they won’t be receiving severance pay, even if they worked for the company for decades.
Previously the company paid severance after any downsizing; those days are over. In many states workers will also lose unused vacation and sick-leave pay. Yet executive bonuses, including for disgraced CEO Dave Brandon, were paid out before the company filed for bankruptcy; only the workers were left high and dry.
“The big dogs are getting away with murder,” said Romerick Anderson, an assistant store manager from Ontario, California, who helped organize 11 workers in his area to come east to protest. “When does it stop?”
The story is another chapter in our financialized economy, where benefits flow to the C-suites instead of those doing the work. Toys “R” Us succumbed to a private-equity bust-out, where financial firms load companies up with debt, strip out the profits, and leave destruction in their wake. “I compare private equity to an otter,” said Congressman Bill Pascrell (D-NJ), whose state houses the corporate headquarters of Toys “R” Us. “It tears open a clam, takes the meat, and throws away the shell. It’s people being tossed away.”
Bain and two partners, KKR and Vornado Realty Trust, bought Toys “R” Us in 2005 in a leveraged buyout, using $1.3 billion of their own cash and $5.3 billion in debt. The debt weighed heavily on Toys “R” Us, as it made between $450 and $500 million in annual debt-service payments, along with advisory and management fees to the private-equity overlords. Over the lifetime of the arrangement, Bain, KKR, and Vornado managers took in $470 million, money workers helped the company earn. “It was a business that turned into an ATM machine for Wall Street,” said Carrie Gleason of the Center for Popular Democracy, which is assisting the worker’s campaign with Rise Up Retail, a partnership with Organization United for Respect.
The debt payments, not anything fundamental with the company, brought Toys “R” Us low. The stores grew operating income over the past three years, with over $11 billion in annual revenue. Last year it sold one out of every five toys in America, despite competition from Amazon and others. Its net losses the past few years were less than its debt payments. “The company makes $11 billion a year, you kind of wonder,” said Debbie Beard, an assistant manager from Chandler, Arizona, who has 29 years with Toys “R” Us. “It must be an awful big debt if we can’t bring ourselves out of it.”
Toys “R” Us Executive Vice President Amy von Walter told The Nation in a statement that “ultimately our creditors determined that a liquidation of our U.S. business provided more value for them.” Asked why the workers would receive no severance as they scrambled to find another job, von Walter said, “Because we were forced to liquidate, we were not able to follow the normal severance process… in lieu of this payment we were able to provide a minimum of 60 days notice to help employees begin their transitions.”
Of course, that’s not a benefit, that’s the law for mass closings and liquidations, under the WARN Act.
The lack of severance stings because the private-equity gang prospered from the Toys “R” Us debacle. Yes, the owners lost the original investment of $1.3 billion. But the $470 million in management fees softened the blow. And when you add in deductions for interest payments and tax write-offs of the principal, and the fact that the losses were borne on private equity investors rather than the firms themselves, you discover what Marketplace found: that Bain and KKR took home at least $15 million from a company they hollowed out and sunk.
Bankruptcy or liquidation doesn’t hurt them, only the tens of thousands of families who depend on Toys “R” Us for their livelihoods. “I always felt retail and food service have been considered second-class citizens,” Beard said. “We become numbers to them.”
The workers got fed up with being taken for granted. Last Friday, they appeared with Congressman Pascrell and New Jersey Senators Robert Menendez and Cory Booker (who famously defended Bain Capital during Mitt Romney’s run for president) to ask for severance, issuing a companion letter to the private-equity owners. Then, on Sunday, they occupied a store in Union, New Jersey, near company headquarters, sharing stories of how they’ve been treated since Toys “R” Us declared bankruptcy. On Monday, they went directly to the private-equity owners to amplify their voices.
Workers came from all corners of America to represent thousands of colleagues. One was Maryjane Williams, a mother of five from Waco, Texas. She spent 20 years at Toys “R” Us stores in New York and Texas. “I enjoyed the job, the people I worked with, we became family,” Williams said. She learned about the liquidation on a conference call. “It was a real slap in the face. I carry the medical benefits for my family. I have life insurance to take care of. I just turned 50, I don’t have a job.”
Williams was among an original group of six who traveled to Washington to brief lawmakers on the situation. Nearly 100 made it out to New York, many bringing spouses and children. The workers did most of the organizing, connecting online to encourage each other to turn out. “We’re one big family,” Williams said. “We might not be in the same store, but we’re like the cousins. You feel the pain of what the next person is going through.”
Gleason, of the Center for Popular Democracy, noted that none of these workers had ever been involved in a protest action before. “They just want people to know what they’re going through,” she said. “There’s so much energy, I’ve kind of never seen anything like it.”
Worker uprisings have reverberated across the country in the past several years, from fast-food clerks to teachers in red states savaged by disinvestment. Retail workers at Toys “R” Us, just one of the numerous bankruptcies caused by private-equity rapaciousness, represent a new front in this war: calling out Wall Street’s relentless pursuit of profits, and the yawning social divide financial engineering can create.
Congressman Pascrell wants federal legislation to prevent private-equity firms from taking on too much risk. In 2013, bank regulators issued guidance warning against leveraging companies with debt more than six times earnings; Toys “R” Us was at 7.5. “More of this is going to happen when you have leveraged buyouts,” Pascrell said. “All signals come from the White House, and the signal is deregulation.”
Fighting for better legislation, or through the bankruptcy court, as the Center for Popular Democracy plans to do soon, is all well and good. But workers are trying to make private-equity executives uncomfortable in their own offices, forcing a reckoning with the disaster they wrought on families. The past several years have taught workers to quit being reasonable, and get onto the streets.
Maryjane Williams comes from a bipartisan family: Her husband votes Republican. She told her daughter, a public-school teacher, that after this she would have to join up with the teacher strikes. “Absolutely, I would support them, they’re supporting me,” she said. “We were walking down the street in New York and there were people saying go Toys ‘R’ Us, you deserve it.”