Two former owners of Toys R Us have agreed to pay $20 million to help laid-off employees following the retailer’s collapse.
Bain Capital and KKR, both private equity firms that owned part of the toy retailer, have set up a severance fund to pay former workers who lost their jobs when the company closed its stores.
The third owner, the real estate firm Vornado has not joined the fund.
The retailer filed for bankruptcy one year ago, with plans to stay in business. However, in March this year, the company’s creditors forced it to go out of business with 31,000 employees left without severance pay.
US bankruptcy laws place limits on the severance payments that can be made to laid-off employees, and they give priority to repaying creditors of the bankrupt companies. Reports CNN that had the employees been laid off before the bankruptcy, they would have been entitled to severance pay of up to one week of pay for every year of service.
The $20 million severance fund has not come from Toys R Us, but has been set up following negotiations between Bain and KKR and various public interest groups.
“This fund begins to ensure that the hard-working people who spent their lives building Toys R US and making children happy are not left out in the cold,” said Marilyn Muniz, a Toys R Us employee of nearly 20 years.
The groups that have handled the negotiations so far – including Organisation United for Respect, Private Equity Stakeholder Project and Centre for Popular Democracy – are seeking additional contributions to the fund from Vornado as well as two Toys R Us lenders, Solus and Angelo Gordon.
The $20 million fund will not cover a full severance plan for the workers. THe employee groups estimate that would take $75 million.