Survivor11 wrote: ↑Sun Jul 21, 2019 5:49 pm
Honestly, I'm still not sure how they went bankrupt.
Every time I'd go there it was crawling with people.
The check out lines were loooong.
How'd they go bankrupt??!
Imagine you owned an investment firm that had a small amount of money to purchase TRU which was a public company but was having trouble making money and needed to pay off its stock shareholders once and for all to go back to being a private company.
So you have 20% on hand a get a loan for the other 80%. You purchase TRU from the public, but now TRU owes that 80% you bought it with as a loan, plus you're charging TRU "management fees" for buying it out. TRU, in turn, makes money, but not enough to overcome that huge debt burden and increasing interest (like having credit card debt piling up due to high interest rates) compounding on that 80% loan.
You, as a private firm buying it from the public, are supposed to turn it around, make it leaner and meaner, so it can adjust to the changing times and make money while shedding its bloat and pay off its debt. But you don't do that. You let the company fester and its debt grow while taking your mgmt cut like a bloodsucking parasite. Meanwhile every year the profits being made go to just paying the ever growing "credit card" interest while never even touching the principal debt balance.
Eventually, the debt burden is too much to make ends meet let a lone make a profit, and the company files for bk.