- Private equity firm Thomas H. Lee Partners added $1 million to a hardship fund for former Art Van employees who lost their jobs in the furniture retailer's liquidation.
- That brings the fund's total to $2 million after a year-long pressure campaign by workers, according to a press release from United for Respect, a worker activist group focused on the retail industry.
- Eligible employees can receive $1,200 each from the fund, according to the release and as previously reported by Bloomberg. A spokesperson for Thomas H. Lee Partners did not immediately respond to request for comment.
Since 2016, dozens of private equity-owned retailers have gone bankrupt, many of them, like Art Van, liquidating in bankruptcy.
Well before the COVID-19 pandemic, the combination of high debt loads from leveraged buyouts and rapid changes in the retail world has proved an often fatal combination. As of July 2020, about a third of retailers owned or previously owned by private equity firms since 2002 had filed for bankruptcy, according to a Retail Dive analysis.
A study from December, released by Americans for Financial Reform, the Center for Popular Democracy and United for Respect, traced 542,000 lost jobs and 18,000 closed stores to private equity-owned retailers. That figure nearly quadrupled private equity's job creation figure in the retail industry.
Even when retailers close stores or fully liquidate, private equity firms don't necessarily lose money on those investments. Financial firms commonly pay themselves dividends (often funded with debt) and management fees while they hold a company. They might also hold a company's bonds or other debt and find other financially creative ways to hedge their bets or pull cash out of the companies they own.
Art Van took on debt after its acquisition by Thomas H. Lee and thereafter underwent a rapid expansion, leaving it with a larger lease footprint when it hit troubled waters. After the retailer filed amid "extreme market conditions and faced with limited liquidity," it failed to find a buyer in Chapter 11 to keep it afloat. Some of its best leases were, however, rolled up into a new retailer, Loves Furniture. Loves, too, has gone bankrupt after a disastrous start to its life as a company.
"When THL shuttered Art Van's doors last year, we were left without health insurance, a paycheck, and severance pay in the middle of a global pandemic. We want to make sure this never happens again," said Shirley Smith, a former Art Van sales manager involved in the push for a hardship fund, in a statement.
Art Van and other retail employees working with United for Respect have pushed for legislation, sponsored by Democratic Sen. Elizabeth Warren, that would increase liabilities for private equity firms making leveraged buyouts, curb fees and dividends, and prioritize worker pay in bankruptcies, among other changes.