The State of Minnesota is temporarily suspending future investments in a private equity firm which owns bankrupt Toys ‘R’ Us, amid allegations that K-K-R’s owners took money for themselves while refusing severance pay to laid-off employees of the now-defunct toy store chain. Governor Mark Dayton indicates he wants to confirm whether that’s the case, but in the meantime no additional state dollars will be invested there. Dayton says it’s “very distressing that they [K-K-R’s owners] would take out over 400 million dollars in fees and other payments when in fact they’re piling on debt for the company [Toys ‘R’ Us], and then the company goes into bankruptcy and the employees are left with nothing.” He adds, “That’s the nature unfortunately of the way some of these firms operate. Means they come out ahead, so as a passive investor we [the state] come out ahead at someone else’s expense, and that concerns me.”
The state invested 200 million dollars in the K-K-R Millennium Fund, which included Toys ‘R’ Us — but officials say the state didn’t lose that money and actually saw a substantial increase in value because of the performance of other companies in the fund.
Jim Baker with Chicago-based Private Equity Stakeholder Project asked state officials Thursday to halt future investments in K-K-R until that private equity firm pays severance to laid-off Toys ‘R’ Us employees. Baker says, “The two founders of K-K-R took home more than 400 million dollars in income last year, so they’re not hurting for money — unlike the Toys ‘R’ Us employees who were left with nothing.”
Toys ‘R’ Us has eight Minnesota locations.
Governor Dayton’s comments Thursday:
Interview with Baker: