Basically, the company had to pay for its own buyout when private equity firms KKL, Vornado, and Bain bought the company for $6.6 billion, mostly with loans.
Because the company then had to pay off those extreme loans, they were forced to sell off their assets and property, which they leased back from the very private equity firms that now owned them.
The same thing happened more recently with Red Lobster and JoAnn Fabrics.
This is one of those situations where it once again shows that:
- Private equity stakes in companies are bullshit and at the very least need to be utterly regulated to hell and back.
- More specifically, it should not be allowed to buy a company “on debt”. If you want to buy somebody, you need cash-on-hand to do that. That’s the only allowed form.
Selling property to rent it back should also be super illegal. Is there ever a time this makes sense. If you want to sell land to profit, close the fucking place, there’s no way it’ll suddenly be more profitable while renting.
It would make sense for me to sell my apartment and rent it back because I get fucked by ODSP if I take a roommate while I’m an owner and I can’t afford to live here alone.
It would make sense for an entity that needs to make use of their equity for other things. Many many individuals and companies mortgage their properties or get secured loans. That’s basically the same thing.
If you’re a business owning a building, maintenance is another thing you have to take care of as well as the business. If you’re not equipped to maintain the building or pay people to do it, then it might be better to rent and have the landlord take care of that stuff.
My union is selling our building because it wasn’t really anybody’s job to keep up on maintenance for the last 30 years. Now people that care are in there and they got estimates and whatnot, and it came to like a $600,000 bill to get it all caught up.
So we’re partnering with a local non-profit and moving our office in to their space with meeting rooms and whatnot that we can share. We have one meeting a month and training sessions already happen elsewhere. All of work is done away from the building aside from 3 people in the office full time, so it makes sense in our situation.
Yeah this makes sense, basically the downsizing I was talking about. Though I was thinking about an org with many branches, rather than underutilized office space.
it should not be allowed to buy a company “on debt”. If you want to buy somebody, you need cash-on-hand to do that. That’s the only allowed form.
A company is not somebody, it’s a thing, like a home or a car that you have no problem getting a loan to pay for. Or maybe it’s special because we’re talking about a means of production? C’mon. Say it. Say “means of production.”
No, no companies are people. Buying and selling them is slavery.
The very first words of US law:
1 U.S. Code § 1 - Words denoting number, gender, and so forth
…the words “person” and “whoever” include corporations, companies, associations, firms, partnerships, societies, and joint stock companies, as well as individuals;
Okay? That’s a definition that only has scope within that specific document and those it governs. Plus, it’s a definition of two entirely different words.
Yeah, this is the case for most “public to private” company moves, and other types of private equity acquisition deals. They are all just a massive shell game to liquidate a company’s value and transfer it to those private equity companies. Vulture Capitalism
Death Spiral Financing is one of those things that should be shouted from the rooftops by anyone who wants to spread anti capitalism. It so cleanly displays the evil inherent to the system.
And the same thing is happening to hospitals all over the US, which should fucking terrify you.
We should really restrain what private equity can invest in.
A victim of the good ol leveraged buyout which should be fucking illegal right alongside stock buybacks.
This is like me taking out a loan to buy a car and then expecting the car to make the payment.
And since all the debt is on the company and not the people/organization who bought the company, they don’t suffer any of the repercussions of defaulting on the loans. Why this isn’t illegal is beyond me.
It was illegal, then Reagan changed that.
Because of course it was Reagan.
Elementary my dear billwashere, in one word: money.
People don’t notice the leeches, so noone cries out. This enables said private equity leeches to
bribe politiciansmake considerable donations to various political action committees. And believe it or not, politicians like money.Well, in theory it’s the responsibility of the banks to not make bad loans. If private equity passes on their debt to the company they bought, and then that company goes bankrupt and the private equity walks away free, that’s still the bank’s problem and they’re gonna lose a lot of money. Of course the problem is banks have a pretty bad track record about being disciplined with their loans.
Yeah?
Isn’t that the entire thing that private equity firms do? Buy up companies, sell all their assets to the private equity firm, then have them lease it all back for insane amount until it’s bankrupt.
Makes a whole lot of short term profits, destroys the company and it’s employees. No fucks given
Private equity firms are a cancer (amongst many cancers) on humanity
They killed Karstadt this way, V&D, and I bet a bunch of other department stores too.
Looks like EA is next on the chopping block.
The actions taken by private equity companies seem very similar to those taken by organized crime syndicates when THEY take over a business
Odd, don’t you think?
Like in Goodfellas, cannibalizing their own community. Embezzle and steal everything you can, then torch the place for the insurance.
But in Goodfellas, the owner of the restaurant approaches the mafia and asks Paulie to “be a partner”, so he can get Tommy to stop terrorizing the place AND running up tabs he has no intention of paying.
Imagine some short mafia type with a Napoleon complex walking around the Toys R Us aisles, knocking merchandise off the shelves while harassing kids and their mothers.
I betcha the equity firms approach with a silk tongue and Wall St technobabble jabberwocky. I know those CEO business types, the read their CEO magazines chock full of pseudoscience articles like, for example, determining a personality type via their handwriting style, the hooks and curves of their calligraphy. Corporate astrology, just as gullible to fancy jargon as the proverbial Man Down The Street.
Nah. They have deluded themselves with ideas of “rescuing” the company. But they protect themselves financially first. Then they don’t have the awareness to show that a business could have just made 1-2% a year forever instead of selling off assets for a chance at 4Xing their investment. They think its how life works. Take the big risk and never consider the costs as long as your ass is covered.
Time to kill private equity……with crippling regulation and accountability of course
Nah just make the rich people pay their taxes. Then they won’t have money for stupid shit like this
Not when you live in a country where private equity basically owns the government.
I watch the YouTube channel “Company Man” that does a bunch of interesting business stories. 95% of the “Decline of (brand)” or “Rise and Fall of (brand)” videos are because of leveraged buyouts.
A group of idiots borrow billions of dollars, throw the unrecoverable debt onto the books, slowly killing the company, and then it’s dead.
Who loans this money? How does that work? I understand the rest of it about being a bastard who collects millions in salary and bonuses while driving a company into the ground. I just don’t understand where the money comes from, or why.
It may be U.S. plutocrat strategy to weaken political enemies by killing their companies.
Consider Microsoft destroying Nokia and their Linux phones to benefit fellow American companies Apple and Google.
Consider the Destruction of OkCupid as an attack against its liberal-skewed user base.
Oh it is real simple. Imagine you have a really nice truck that is all jacked up with a lift, big tires, light bar, supercharger, etc.
I want to buy it and you want $10k for it since it is an older model and most of it’s worth is from the accessories. The problem is I don’t have $10k. I only have $2k.
This is where the magic happens. I find some someone who will buy all your accessories for $8k. I make a deal, let me strip your truck and I will pay you $10k for it.
You agree and I come over, take off all the accessories and then sell them for $8k and then buy your truck for $10k.
The truck is pretty worthless at this point without wheels or anything, but I can sell it for about $3k. Well, I ruined the truck and made a thousand bucks. This is a silly example of how they get the money.
It isn’t the only company to die this way. Sears was cellar boxed the same as toys r us. It was what was intended for gamestop but the whole wallstreetbets thing happened and prevented it.
I live in a place that suddenly became a fucking healthcare desert because of this shit. The local hospital network was bought by vulture capitalists who sold the real estate to themselves and then leased it back to the hospitals, racked up enormous debt almost entirely due to obscene bonuses they paid themselves, then declared bankruptcy. The hospitals are all closed now but the vulture capitalists have their cash and still own the real estate. I recently had to spend two days in the ER of a far-away hospital that has been swamped with the overflow, with my mom in a bed in the hallway for the entire fucking time. Muigi Langione is the thing to do.
This kind of buyout should be made illegal.
This has become a common thing. It’s assumed brick-and-mortar is dying due to Amazon and Temu and such. It’s not; they’ve been on that path for a long time, and the companies that were going to die to it have already gone. However, it is a popular perception.
Private Equity gets to use the popular perception as a cover for shady ass shit.
Shopko was a midwestern chain of department stores. In their final years, they typically staffed like three people for the whole store. It’s not as big as a Super Walmart or anything, but it’s a sizable store in any case. They had one person on checkout, one in customer service, and one more running around the rest of the store. Maybe one or two more, but suffice it to say, it was deeply understaffed and it felt like it.
Behind the scenes, private equity had been taking out loans against the store’s real estate, gave themselves big bonuses with that money, and left the company as a whole with unaffordable debt. Also, the money being taken out at the register for sales taxes wasn’t actually being paid to the state.
Shopko was murdered. There is a standalone optical division that still operates, but the rest is gone.
And now they want access to 401Ks
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Yeah, the term “venture capitalist” is very negative in my mind because of how they destroy companies from the inside out to profit themselves. Fuck them.
I think Kmart and Sears are in this list, too, along with Bed, Bath, and Beyond and even some hospitals. There’s nothing private equity forms won’t do to make a buck at the expense of a once thriving company or even people’s healthcare.
Often private equity is invested in their competitors. One of the problems of rich people having ungodly sums is they like to “invest” in competitors and sell them for parts so they can raise prices.
