KKR and Bain create severance fund for past Toys R Us employees

The $20m fund will make former employees who meet a defined set of criteria eligible to receive compensation.

KKR and Bain Capital officially confirmed the creation of a $20 million severance fund for past workers of Toys ‘R’ Us.

The firms announced the creation of the vehicle Tuesday, which is meant to provide compensation to the more than 30,000 workers who were left without severance after the retailer’s liquidation in March.

The two firms, both previous owners, each contributed $10 million to the fund. None of the capital came from limited partners. The vehicle’s terms are flexible, and other firms can contribute to it if they choose, according to the press release.

The fund will be entirely externally managed by Kenneth Feinberg and Camille Biros, who were appointed by KKR and Bain. Both Feinberg and Biros have worked with other special situations funds, including the 9/11 Fund, the BP Oil Spill Fund and the OneOrlando Fund, among others.

The fund terms were put together by representatives from KKR, Bain, Organization United for Respect, past Toys ‘R’ Us employees and Feinberg and Biros.

For past workers to be eligible for compensation, they need to meet four criteria: They need to have worked at the company for over a year by the time of the bankruptcy announcement last September, must have earned between $5,000-$110,000 a year while employed there, been terminated after the bankruptcy announcement and must not have received prior compensation from the company.

Seasonal workers are not eligible.

There are four conference calls scheduled between 27 November and 3 December for past workers or the public to get more information on the fund distribution proposal and ask questions. They will have until 4 December to comment about the proposed protocol on the fund’s website. Anyone can comment, including members of the public who are not involved.

The official payment plan will be announced shortly after the comment period. The payments are expected to begin on 15 December and be out to workers by 30 April of next year, according to the fund’s website.

This announcement comes after over a month of speculation and rumors about the fund’s creation – the first of its kind by private equity sponsors after a liquidation. It remains unclear what effect this fund’s creation will have on private equity-backed company liquidations in the future.

KKR and Bain both declined to comment at this time.