TOTOWA, N.J. – U.S. Senators Bob Menendez and Cory Booker (both D-N.J.), and Congressman Bill Pascrell, Jr. (N.J,-09), were joined today by Toys ‘R’ Us workers and advocates in standing up for employees at the iconic New Jersey-based retailer after it was forced into bankruptcy following a leveraged buyout that saddled it with exorbitant debt. In a leveraged buyout, a company is acquired by a specialized investment firm using a relatively small portion of equity and a relatively large portion of outside debt financing.
“This storied New Jersey company was run into the ground by a bunch of corporate raiders looking to turn a profit. They drained Toys ‘R’ Us of its resources and ability to adapt, and treated its workers, who spent years bringing smiles to the faces of our children and delighting them with everything from ‘bikes to trains to video games,’ as expendable, as afterthoughts, as collateral damage, leaving them with no jobs, no severance and no path forward,” said Sen. Menendez. “When more than 30,000 workers lose their jobs while those at the top walk away with millions, something is seriously wrong. But these firms still have time to right these wrongs, to do the decent thing, and give these hardworking people and their families a fighting chance at landing on their feet.”
“America should work for people who work hard and play by the rules, but that bargain was broken for thousands of Toys ‘R' Us workers whose company was saddled with so much debt and fees from financial firms looking to pad profits that the company simply couldn’t succeed,” said Sen. Booker. “Now, workers are being left with nothing while these same firms are in line to recover millions from Toys ‘R’ Us’ liquidation. I stand in solidarity with workers who lost their jobs through no fault of their own and challenge these firms to provide workers the dignity they deserve through fair severance compensation.”
“These private equity companies’ dismissal of the Toys ‘R’ Us workers is a sin. They need to take the nearly half a billion dollars they sucked from the company and pay each of their 33,000 workers—including 1,500 in New Jersey—a severance for their loyal service, today,” said Rep. Pascrell. “Throughout the country, private equity firms have destroyed cherished brands, diminished wages, widened the income gap, and cannibalized thousands of jobs while pocketing billions through slick schemes like leveraged buyouts. Policy must prioritize workers, not Wall Street executives. I am proud to join Sens. Booker and Menendez in demanding that federal regulators ramp up the rules on private equity investors who act in predatory ways to destroy companies like Toys R Us while they turn a profit. Congress must close loopholes and reform risky practices being used or more companies will inevitably fall victim to Toys ‘R’ Us’s fate.”
In March, Toys ‘R’ Us announced it would be closing its stores and laying off all 33,000 workers, including more than 1,500 in New Jersey. Toys “R” Us stated in a letter to employees that they will not pay out severance due to its financial condition.
Standing outside the Toys “R” Us store in Totowa today, Sens. Menendez and Booker, and Rep. Pascrell announced that they wrote to the private equity firms responsible for the Toys ‘R’ Us bankruptcy, challenging them to fully examine and adopt any measures to support employees as they transition out of their jobs.
"I'm not sure what I'm going to do without my job once I'm done," said Cheryl Claude, an Assistant Manager at a Toys 'R' Us in Woodbridge, N.J., who has worked at the store for more than three decades. "My husband works at BJ Wholesale; to add me to his health insurance is going to be half his paycheck. I feel I have done so much and to get nothing after 33 years is just wrong."
"Wall Street caused the Toys 'R' Us bankruptcy, but working families are paying the price. It's not fair, it's not right, and that's why hundreds of these workers from all around the country are mobilizing today to hold KKR and Bain Capital accountable," said Carrie Gleason, Director of the Fair Workweek Initiative at the Center for Popular Democracy. "They're standing up to win justice for the tens of thousands of people - mothers and fathers, veterans and students - who have put in decades for the company and deserve to be treated with dignity after a bankruptcy that happened through no fault of their own."
"Private equity and hedge fund managers on Wall Street are attacking workers, hurting our communities and putting our country at risk once again. We stand with the 33,000 Toys 'R' Us workers who are losing their jobs after Bain Capital, Vornado and KKR raided the company and left the workers and their families with nothing," said Sara Cullinane, Director, Make the Road New Jersey.
As part of the ongoing weekend of action, on Saturday, dozens of Toys ‘R’ Us workers from across the country will join local families to take over the Toy ‘R’ Us store in Union, NJ to demand severance pay. On Monday, Toys ‘R’ Us workers will hold demonstrations at the offices of major private equity firms that helped accelerate the Toy ‘R’ Us bankruptcy.
Full text of the senators’ and congressman’s joint letter is below:
June 1, 2018
Co-Chairs & Co-Managing Partners
Bain Capital, LP
200 Clarendon Street
Boston, MA 02116
Board of Directors
KKR & Co. L.P.
9 West 57th Street
New York, NY 10019
Board of Trustees
Vornado Realty Trust
888 Seventh Avenue
New York, NY 10019
To Whom It May Concern:
We write to urge you to do everything in your power to support the thousands of Toys ‘R’ Us workers who will soon lose their jobs as the company closes its doors.
The planned closure of Toys ‘R’ Us, headquartered in New Jersey, marks the end of an iconic American company with approximately 33,000 workers, including more than 1,600 employees in our state. The heart of this story is not about industry changes, big-box retailers, or e-commerce. Rather, it was a deal—with some $5 billion in debt—that was flawed from the start.
Between debt payments and hundreds of millions of dollars in fees to your firms, the company was simply unable to make the investments in operations and technology needed to adapt and compete in the ever-changing retail sector. Absent crippling debt payments, as well as a reported $470 million in management fees and payments paid to Bain Capital, KKR, and Vornado Realty Trust, we have little doubt Toys ‘R’ Us would be a profitable company and job creator today.
Now, as Toys ‘R’ Us plans to close its U.S. stores, the 33,000 workers across the country who have supported Toys ‘R’ Us are left to face the consequences. Many Toys ‘R’ Us employees have spent years, even decades, as anchors of their communities, operating Toys ‘R’ Us stores, distribution centers, and facilities across the country. But after the company’s bankruptcy and planned closure, all of these workers will be left without a job—and, crucially, without the severance pay that employees often receive after mass layoffs.
Still, there is a chance to do right by the company’s workers. We urge you to fully examine and adopt any and all measures to support the more than 30,000 Toys ‘R’ Us employees who have lost their jobs through no fault of their own and now have to navigate the hard transition. We can all agree that they deserve nothing less than the fullest support possible.
Thank you for your consideration.