Elizabeth Warren goes to bat for Toys R Us workers
Tens of thousands workers laid off when Toys R Us went bust last year have a politically powerful new ally in their fight to win severance from the bankrupt retailer: Sen. Elizabeth Warren.
The Massachusetts Democrat, who is rumored to be weighing a run for the White House in 2020, is pressing the financial firms behind the decision to liquidate Toys R Us to contribute to a fund for affected employees. She also wants the companies -- which include Angelo Gordon & Co., Franklin Mutual Advisors, Highland Capital, Oaktree Capital, Solus Alternative Asset Management and Vornado Realty Trust -- to explain why they pushed to liquidate the toy seller rather than reorganize under bankruptcy protection.
"The liquidation of Toys R Us -- reportedly at the urging of your firm -- caused more than 30,000 American workers to lose their jobs without the severance they would otherwise receive," Warren wrote Tuesday in a letter to Steven Roth, CEO of Vornado, which had an ownership stake in the retailer. "I strongly urge you to participate in discussions about financing a viable hardship fund for the affected families."
In a similar letter sent to five large holders of Toys R Us debt, Warren asked if the creditors had rejected potential acquisition offers for the company.
"Given that there was significant interest in keeping U.S. stores open and saving thousands of jobs, and that key debtholders believed that this was a viable option, how did you come to the decision of forcing liquidation?" Warren asked.
Toys R Us filed for bankruptcy in September 2017 with a plan to stay in business after restructuring the company. But that effort came to a halt in March after five debt holders pushed for a liquidation of assets instead, after determining the retailer would be worth more expired than running.
Private equity firms Bain Capital and Kohlberg Kravis Roberts -- two of three buyout firms that bought the company in a leveraged buyout in 2005 then loaded it with billions in debt before the chain's liquidation in June -- reportedly have set aside millions for former employees. Vornado is reportedly not participating.
Labor group says employees owed $75 million
Carrie Gleason, campaign manager for the worker advocacy group Rise Up Retail, said discussions continue about the fund to help workers laid off without severance.
Rise Up Retail maintains workers are due $75 million in severance, while $20 million has reportedly been reserved for workers. Before its bankruptcy, Toys R Us guaranteed employees two weeks of severance for their first year in the job, and one week of pay for every two years of work thereafter.
"Sen. Warren's inquiry to the five lenders that provided bankruptcy financing to Toys R Us is a welcome opportunity to address the facts, which will lay to rest the false narrative that Solus and the other lenders are responsible for the demise of the company and the loss of jobs," a spokesperson for Solus emailed. "We share Sen. Warren's concern about the loss of jobs, and we will continue to explore responsible opportunities to further support the Toys R Us brand and the affected employees."
Highland Capital and Angelo Gordon declined comment in an email, while the other companies did not respond to requests for comment.
In response to another inquiry from a group of lawmakers in July, KKR reportedly stated that it opposed the decision to liquidate the company's U.S. operations. "We wanted the company to restructure, return to health and vitality, and stay in business—but the creditors had a different and prevailing view," KKR stated, according to the Wall Street Journal.
Amid the calls for accountability and help for laid off workers, there have also been whiffs of a possible revival of the Toys R Us brand.
The retailer's mascot, Geoffrey the Giraffe, recently made an unexpected -- and for some unwelcome -- appearance at a toy industry trade show, seemingly sent by a group of secured lenders that controls the failed retailer's intellectual property and are planning a second act.
"Geoffrey being here just reminded us about how much money they still owe everybody," Beaver Raymond, co-founder of Dallas-based Marshmallow Fun Co., the maker of Marshmallow Blasters and a former Toys R Us vendor, told the Dallas Morning Sun.