New owner of the Toys R Usbrand, Solus, said the responsibility for the toyseller's shutdownlay with its private-equity sponsors who saddled the company “withcrushing debt.” (Photo: Bloomberg)

(Bloomberg) –Senator Elizabeth Warren is urging more firms tocontribute to a newly formed hardship fund for former Toys “R” Usworkers. In response, some are saying they're sympathetic — but notresponsible.

“It is still inexcusable that many of Toys 'R' Us's investorshave been unable or unwilling to help the more than 30,000 Americanworkers who lost their jobs after investors reportedly pushed toliquidate the company,” Warren said in a statement Tuesday.

She said Solus Alternative Asset Management, Highland Capital,Franklin Mutual Advisers, Angelo, Gordon & Co., OaktreeCapital, and Vornado Realty Trust should augment the $20 millionfund created by KKR & Co. and Bain Capital.

The toyseller's former private-equity owners said they wereforming the fund on Tuesday after months of pressure from formeremployees and their representatives, along with some public pensionfunds and lawmakers including Warren, a former Harvard Law Schoolbankruptcy expert who is considering a run for president in2020.

The groups, linked to the Center for Popular Democracy, estimatethat workers are owed $75 million in severance pay, and they'vealso pressed Toys “R” Us creditors including Solus to pitch in.

KKR and Bain said in a statement they created the fund “inresponse to an extraordinary set of circumstances for both of ourfirms. The confluence of the disruption in retail, the push by thecompany's secured creditors to liquidate the company's U.S.operations, and the fact that we have never experienced somethinglike this in the history of either firm, led us to try and find away to provide some financial relief for former employees.”

Fund contributions

Solus, for its part, said the responsibility for the toyseller'sshutdown lay with its private-equity sponsors who saddled thecompany “with crushing debt.”

Lenders “neither desired nor had any ability to 'push' theliquidation,” Solus said in a statement provided to Bloomberg.Lenders “have made substantial contributions to employees,including $35 million to compensate affected workers and another$180 million to pay administrative claims, includingseverance.”

Solus and Angelo Gordon now own the Toys “R” Us brand and areweighing a revival of the chain, Bloomberg previously reported.

Solus said in its statement that the lenders are looking to usethe brand in a way that would create jobs, “as well as exploringadditional opportunities to support former employees.”

Representatives from Highland and Angelo Gordon declined tocomment while those at Vornado and Franklin Mutual didn't respondto messages.

The workers' efforts to get severance pay are just one part ofthe decline and fall of Toys “R” Us, and there's been plenty offinger-pointing. The company took on $5 billion of debt in the 2005buyout, a burden that left it ill-equipped to handle competitionfrom Walmart Inc. and Amazon.com Inc.

Workers angry

While the original intent was to reemerge after filing forbankruptcy last year, disappointing holiday sales and a complexcapital structure ultimately led lenders to conclude thatreorganizing was futile. That prompted fury from workers who saidthe company could have been saved.

Another of the lenders, Oaktree, said it didn't have a role orinfluence in that decision because unlike the others in thecritical group of lenders, it didn't provide bankruptcy financingand thus wasn't involved in key discussions about the toyseller'ssurvival.

“While we very much sympathize with the employees who lost theirjobs as a result of the Toys “R” Us liquidation, it wouldn't beappropriate for our funds, which are owned by our public andprivate pension, union and other clients, to compensate for lossesthat our funds and our clients had nothing to do withcreating.”

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