How Many of 2017’s Retail Bankruptcies Were Caused by Private-Equity’s Greed?

March 2018, Claire's has declared bankruptcy. It was purchased by the private equity firm Apollo Global Management for $3.1 billion in 2007.

Iheartmedia which owns Iheartradio, formerly named Clear Channel, is another company owned by private equity firms that has recently declared bankruptcy.

I notice that news reports never mention the people that own and run these private equity companies who buy companies, load them with debt, pay themselves huge amounts, then declare bankruptcy, leaving their debtors, including pension plans, unpaid.

http://wallstreetonparade.com/2017/09/how-many-of-2017s-retail-bankruptcies-were-caused-by-private-equitys-greed/

By Pam Martens and Russ Martens: September 20, 2017

According to S&P Global Market Intelligence, there have been 35 retail bankruptcies this year, almost double the 18 retail bankruptcies of last year. The filing by Toys ‘R’ Us this week was the latest.

What many of these retailers have in common is that they were taken private in leveraged buyouts (LBOs) by private equity (PE) firms. Toys ‘R’ Us, Payless ShoeSource, The Limited, Wet Seal, Gymboree Corp., rue21, and True Religion Apparel were all LBOs. Gander Mountain can also be included in this list if you reach back to its 1984 LBO. Far too many LBOs are simply asset stripping operations by Wall Street vultures who load the company with enormous debt, then asset strip the cash from the company by paying themselves obscene special dividends and management fees.

On June 12 of this year, the official committee of unsecured creditors to Payless, consisting primarily of Payless stores’ landlords and vendors, alleged in a filing in U.S. bankruptcy court that the private equity firms involved in the Payless LBO in 2012, Golden Gate Capital and Blum Capital, had “siphoned over $400 million out of Payless.

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In April, Aisha Al-Muslim, a reporter for Newsday, the Long Island, New York newspaper, found the following after an in-depth review of court documents and data from top research firms like S&P Global Market Intelligence:

“…43 large retail or supermarket companies, which owned chains with 10 or more locations, have filed for bankruptcy in the United States since January 2015. The 43 companies controlled 52 brick-and-mortar chains. Twenty-one of the companies had stores on Long Island. Retailers selling only online and restaurants were excluded from the count.

“Of those 43 companies, 18 — more than 40 percent — were owned by private equity firms. The remainder were public or private companies or owned by a hedge fund.”

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Following are some of the largest retail names that have sought bankruptcy protection thus far this year:

Toys “R” Us
The Limited
Wet Seal (Second bankruptcy filing)
Eastern Outfitters
BCBG Max Azria
Vanity
Hhgregg
RadioShack (Second bankruptcy filing)
Gordmans
Gander Mountain
Payless ShoeSource
rue21
Gymboree
Cornerstone Apparel
True Religion Apparel
Perfumania
Vitamin World
Aerosoles
Michigan Sporting Goods Distributors
Marbles Holdings LLC

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