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Reuters reports that lawyers representing Toys R Us in its bankruptcy proceedings say that the retailer will put aside $156 million “to pay vendors for toys and merchandise shipped” after the company’s Chapter 11 filing last September.

The story says that “the vendor reserve fund will be carved out of a broader budget meant to cover some expenses as the retailer winds down its business in the largest-ever U.S. retail liquidation.”

There’s a problem, though, according to lawyers for some of those vendors: “The amount fails to cover total trade claims worth roughly $760 million.”

The story goes on to say that “many vendors believed that payment for shipments after the Sept. 18 Chapter 11 filing would be covered by a $3.1 billion bankruptcy loan, but that loan gives priority to lenders and other expenses such as legal fees.”
KC's View:
This is the same company that successfully persuaded a bankruptcy court judge to allow senior execs to be paid $14 million in incentive bonuses so that they feel “properly motivated and incentivized to handle the panoply of responsibilities attendant” to their responsibilities for getting the company through the holidays and a concurrent restructuring.


This came up yesterday again when Tops also asked a bankruptcy court judge to approve millions of dollars in incentive bonuses. Since I wrote that story and suggested in commentary that the execs would get bonuses while vendors and landlords get screwed, I’ve heard from vendors who said that this precisely the case.

It seems to me that if you want to give these retail execs an incentive, require them to pay their creditors 100 percent of what they’re owed. If they can’t or don’t do it, they don’t get any extra money.

Don’t tell me it isn’t possible. It is. I know of companies where it has happened, and the difference is that they were owned and run by people who thought they had an obligation to people other than themselves.

These Toys R Us people make me sick.