Reality check:
Successful and money-making companies often go under regardless. They get bought out by some hedge fund, which then puts them deep in debt to pay their investors a dividend. They sell off the company's properties for a quick profit, leaving it in more debt for rent. And then they walk away.
This is
what's happening with Red Lobster and Olive Garden:
Starboard Value previously pulled the stunt with Red Lobster, selling the real-estate out from under 500 restaurants to a "real estate investment trust," freeing $1.5B for dividends to investors like Starboard, leaving Red Lobster limping along paying rent in the locations it had previously owned, profits cut in half -- after Starboard had milked it for its giant, one-time payout.
This is a common hedge-fund scam: it's what killed Mervyn's, costing 30,000 jobs after the business's hedge-fund owner sold the stores' property out from under it, breaking the business's back on rent payments for property that it had once owned (the hedge fund cleaned up from the real-estate sale).
As your New York Post story says, Remington was bought by Cerberus Capital Management a few years ago. Cerberus gets a mention in the Rolling Stone's
Greed and Debt: The True Story of Mitt Romney and Bain Capital:
In 2010, a year after the last round of Hertz layoffs, Carlyle teamed up with Bain to take $500 million out of another takeover target: the parent company of Dunkin' Donuts and Baskin-Robbins. Dunkin' had to take out a $1.25 billion loan to pay a dividend to its new private equity owners. So think of this the next time you go to Dunkin' Donuts for a cup of coffee: A small cup of joe costs about $1.69 in most outlets, which means that for years to come, Dunkin' Donuts will have to sell about 2,011,834 small coffees every month – about $3.4 million – just to meet the interest payments on the loan it took out to pay Bain and Carlyle their little one-time dividend. And that doesn't include the principal on the loan, or the additional millions in debt that Dunkin' has to pay every year to get out from under the $2.4 billion in debt it's now saddled with after having the privilege of being taken over – with borrowed money – by the firm that Romney built.
If you haven't heard much about how takeover deals like Dunkin' and KB Toys work, that's because Mitt Romney and his private equity brethren don't want you to. The new owners of American industry are the polar opposites of the Milton Hersheys and Andrew Carnegies who built this country, commercial titans who longed to leave visible legacies of their accomplishments, erecting hospitals and schools and libraries, sometimes leaving behind thriving towns that bore their names.
The men of the private equity generation want no such thing. "We try to hide religiously," explained Steven Feinberg, the CEO of a takeover firm called Cerberus Capital Management that recently drove one of its targets into bankruptcy after saddling it with $2.3 billion in debt. "If anyone at Cerberus has his picture in the paper and a picture of his apartment, we will do more than fire that person," Feinberg told shareholders in 2007. "We will kill him. The jail sentence will be worth it."
Cerberus
bought Remington Arms for $370 million - a price which include $252 million in assumed debt. As your New York Post story says, when someone wanted to buy the company off Cerberus, "Remington passed and ended up borrowing more money to pay investors a dividend, raising its debt load to more than $1 billion." Now it's likely unsellable.
It's only a matter of time until you hear about lib'ruls, gun control and Obama being responsible for the company's demise.
