$20 million severance fund started for Toys R Us workers

A months-long campaign to get severance for more than 30,000 former Toys R Us workers is partially paying off, with two private-equity firms setting aside $20 million for a severance fund.

Bain Capital and KKR — two of the three companies that took over the retailer in a $6.6 billion leveraged buyout in 2005 — on Tuesday said they will each contribute $10 million to a financial assistance fund for employees laid off without severance when the chain closed 735 U.S. stores earlier this year.

Nevertheless, the $20 million falls $55 million short of what advocates say would be needed to cover severance payments to employees under policies in use for decades at the iconic retailer, which declared bankruptcy in September 2017. The current $20 million figure comes to about $660 for each laid off worker, although the amounts will vary depending on time served.

“I wish we could get more from the other companies for our families,” Cheryl Claude, who worked for Toys R Us for 33 years, the last 28 in Woodbridge, New Jersey, told CBS MoneyWatch. “This is a start. We’re going to keep pushing.”

The third firm that participated in the takeover, Vornado Realty Trust, hasn’t contributed. Five other creditors who pushed for the toy seller’s liquidation instead of reorganization so far have also not contributed to the fund. Angelo Gordon & Co., Franklin Mutual Advisors, Highland Capital, Oaktree Capital, Solus Alternative Asset Management either declined or did not return requests for comment.

“We are glad that KKR and Bain have decided to create this fund to help thousands of families in time for the holidays,” said Carrie Gleason, Organization United for Respect’s campaign manager of Rise Up Retail, a worker advocacy group. “The fund needs to grow to make these families whole.”

In a joint statement, KKR and Bain Capital sought to set themselves apart from other firms involved in the big-box chain’s demise.

“After being a part of the community and and supporting Toys R Us for 12 years, and advocating for a very different outcome than what occurred, we are establishing this fund in response to an extraordinary set of circumstances for both of our firms,” KKR and Bain Capital said in an emailed statement. 

“The confluence of the disruption in retail, the push by the company’s secured creditors to liquidate the company’s U.S. operations and the fact that we have never experienced something like this in the history of either firm led us to try and find a way to provide some financial relief for former employees,” the financial firms stated. “We hope others will consider joining and contributing.”

A campaign supported by the advocacy groups Center for Popular Democracy and Gleason’s group applauded the move in a news release as “the first important step in ensuring that Toys R Us employees who lost their livelihood receive the support they were promised.” 

KKR and Bain Capital said they appointed Kenneth Feinberg, an expert on administering compensation funds, and his colleague Camille Biros to oversee distributions from the fund, a process expected to begin Dec. 15 and be complete by the end of April.

Those who worked at Toys R Us for at least a year are eligible.