The Rise and Fall of Toys 'R' Us (2018)

Private equity’s role in the collapse

• Multiple comments argue the article underplays the buyout’s impact.
• Described “playbook”: load the company with acquisition debt; cut inventory, maintenance, and vendor payments; sell off real estate and lease it back; pay large management fees/bonuses; then let the overleveraged “husk” go bankrupt.
• Concrete symptom: late-era stores often lacked basic, durable toys, driving customers to Amazon/Target.
• View: PE “hates inventory,” squeezes suppliers, and degrades the customer experience, which then kills long‑term viability.

How the financing works and who loses

• Explanation of leveraged buyouts: the target company borrows to fund its own purchase; loans are underwritten by banks then sold as high‑yield (“junk”) bonds.
• Banks often see this as a “hot potato” game: earn origination fees and offload risk in securitized form (sometimes mixed into CDOs).
• Debate over who ultimately holds the bag:
  • Some say “unsophisticated” retail investors and retirement savers end up with the junk.
  • Others stress that initial lenders are sophisticated, price in risk, and sometimes even profit despite eventual bankruptcy.
  • Disagreement about whether FDIC/taxpayers meaningfully backstop this specific risk.
• Several point out that not all PE is extractive; some deals aim at real turnarounds, so LBOs aren’t automatically “bust outs,” though Toys “R” Us is cited as a negative example.

Market dynamics vs. mismanagement

• One camp: even without PE, the Toys “R” Us model was doomed by Walmart/Target, Amazon, and shifts toward screens and video games. Big-box toy-only stores lacked ambiance, interactivity, and price competitiveness.
• Another camp: the toy market still exists (kids, physical toys, experiential shopping), and examples like Barnes & Noble show large specialty retail can adapt with the right strategy. PE leverage removed the runway to pivot.
• Consensus: the market for toys persisted but at lower margins and with most volume captured by generalist and online retailers, leaving little room for a 1990s‑style superstore chain.

Surviving international arms

• Canadian and Asian Toys “R” Us operations are noted as still active.
• Explanation: they were financially separated from the US entity and not burdened with the same debt and extraction, making them attractive assets when the US parent went bankrupt.

Nostalgia and decline

• Many recall fond childhood visits, iconic aisles, and specific toys, contrasting sharply with later experiences of “crappy expensive garbage.”
• That emotional gap reinforces the narrative of gradual degradation before final collapse.