Basically, the company had to pay for its own buyout when private equity firms KKL, Vornado, and Bain bought the company for $6.6 billion, mostly with loans.
Because the company then had to pay off those extreme loans, they were forced to sell off their assets and property, which they leased back from the very private equity firms that now owned them.
The same thing happened more recently with Red Lobster and JoAnn Fabrics.
It wasn’t fraud but it was poor business decisions based on their hope for massive growth instead of seeing success as steady profitability. They sold off assets (real estate) and then signed up to lease the property back from the new real estate owners. This shifted assets to liabilities. They idea would be to use cash to grow the business. They took too much cash as distributions to investors instead of making sound long term business decisions that would keep ToysRUs operating for the long term.
thank you for the explanation