TY - JOUR
T1 - Financialised Private Equity Finance and the Debt Gamble
T2 - The Case of Toys R Us
AU - Morgan, Jamie
AU - Nasir, Muhammad Ali
N1 - Publisher Copyright:
© 2020 Informa UK Limited, trading as Taylor & Francis Group.
Copyright:
Copyright 2021 Elsevier B.V., All rights reserved.
PY - 2021/3/1
Y1 - 2021/3/1
N2 - In this paper, we pursue a financialisation line of argument exploring the specific features of private equity finance, with a focus on the activity undertaken at scale by the largest management groups or firms. The largest private equity firms wield considerable resources, affect ownership patterns and have the capacity to acquire literally any company. What they do matters. The bankruptcy of Toys R Us and the more general ‘crisis of retail’ illustrate a ‘debt gamble’. A company’s capital structure is radically restructured and equity is reduced and replaced by debt. The gamble is that there will be no change to the external environment that the GP cannot adequately adjust to and that the GP will in fact be able to maintain debt servicing. Although bankruptcy is a ‘worse case’, we contend that from a financialisation perspective, there are a whole set of attendant issues.
AB - In this paper, we pursue a financialisation line of argument exploring the specific features of private equity finance, with a focus on the activity undertaken at scale by the largest management groups or firms. The largest private equity firms wield considerable resources, affect ownership patterns and have the capacity to acquire literally any company. What they do matters. The bankruptcy of Toys R Us and the more general ‘crisis of retail’ illustrate a ‘debt gamble’. A company’s capital structure is radically restructured and equity is reduced and replaced by debt. The gamble is that there will be no change to the external environment that the GP cannot adequately adjust to and that the GP will in fact be able to maintain debt servicing. Although bankruptcy is a ‘worse case’, we contend that from a financialisation perspective, there are a whole set of attendant issues.
KW - debt gamble
KW - financialisation
KW - Private equity finance
KW - Toys R Us
UR - http://www.scopus.com/inward/record.url?scp=85087510838&partnerID=8YFLogxK
U2 - 10.1080/13563467.2020.1782366
DO - 10.1080/13563467.2020.1782366
M3 - Article
AN - SCOPUS:85087510838
VL - 26
SP - 455
EP - 471
JO - New Political Economy
JF - New Political Economy
SN - 1356-3467
IS - 3
ER -