October 16, 2018

Warren Seeks Answers from Vornado Realty Trust and Five Hedge Funds Following Toys "R" Us Liquidation

Senator Urges Companies to Provide Fair Compensation for 30,000 Workers Who Lost Jobs in the Liquidation

Text of the Letters (PDF)

Washington, DC - United States Senator Elizabeth Warren (D-Mass.) today sent letters to Vornado Realty Trust and to five hedge funds -- Solus, Highland Capital, Franklin Mutual Advisers, Angelo, Gordon & Co., and Oaktree Capital -- to request information on the companies' role in the liquidation of Toys "R" Us, which resulted in more than 30,000 American workers losing their jobs without severance pay. 

Toys "R" Us filed for Chapter 11 bankruptcy in September 2017, citing approximately $7.9 billion in debt against $6.6 billion in assets.  News reports related to the Toys "R" Us bankruptcy and liquidation revealed that the majority of this debt was a result of the leveraged buyout of the company in 2005 by two private equity firms - KKR and Bain Capital - and Vornado Realty Trust.  A subsequent report from the Wall Street Journal found that the catalyst for the decision to liquidate the company was its distressed debtholders- Solus, Highland Capital, Franklin Mutual Advisers, Angelo, Gordon & Co, and Oaktree Capital -using their leverage to reject offers to maintain the company and instead push Toys "R" Us into liquidation.

In an attempt to resolve the issue and provide financial relief to the Toys "R" Us employees who lost their jobs, KKR and Bain Capital agreed to create a hardship fund to compensate the fired workers and to contribute a total of $20 million to the fund.  However, this amount falls well short of the $75 million the Toys "R" Us workers are entitled to in unpaid severance.  To date, Vornado Realty Trust and the other five hedge funds have yet to contribute to the fund. 

In her letters, the senator criticized the companies for their role in the wind-down and eventual liquidation of Toys "R" Us, and called on them to contribute to the hardship fund as KKR and Bain Capital have done.

"The liquidation of Toys "R" Us - reportedly at the urging of your firms - caused more than 30,000 American workers to lose their jobs without the severance they would otherwise receive," wrote Senator Warren.  "I strongly urge you to participate in discussions about creating and financing a viable hardship fund for the affected families."

The senator's letters asked a series of questions about the firms' involvement in the closure of Toys "R" Us and requested responses no later than October 30, 2018.