Thousands of Toys ‘R’ Us workers who lost their jobs earlier this year soon may receive severance payments, setting a new precedent for private equity-backed companies that file for bankruptcy.
Bain Capital and Kohlberg Kravis Roberts — two of the three companies that bought Toys ‘R’ Us in a 2005 leveraged buyout and loaded it with billions of dollars in debt before liquidating the chain in June — are setting aside millions of dollars in a fund to be distributed to retail workers, according to a person involved in the negotiations who spoke on the condition of anonymity.
A third owner, Vornado Realty Trust, is not contributing to the fund, that person said.
Representatives for Bain Capital and KKR declined to comment on the fund or its size. Vornado didn’t respond to requests for comment.
The Wall Street Journal reported Friday that they had set aside $20 million.
The workers are owed $75 million in severance pay, according to worker advocacy group Rise Up Retail. Before the bankruptcy, Toys ‘R’ Us had guaranteed its workers two weeks of severance for their first year of service, and one week of pay for every two years on the job after that.
“This win at Toys ‘R’ Us is part of a bigger movement of workers and families fighting back to hold Wall Street accountable for the investments that they make,” said Carrie Gleason, campaign manager for Rise Up Retail. “Bain and KKR made an investment that resulted in a lot of harm for families and communities, and the responsible thing to do is step up and pay workers what they are owed.”