- ‘Supermarket giants doomed’. No, just history repeating.
- blockchain-corporation.com*. Would you be interested to invest?
- Is 2018's rosy economic outlook really that rosy?
Ah – classic Christie misdirection. Unnoticed back in 2005, debt had entered proceedings almost hand in hand with private equity. And of course debt never travels alone – interest rates are always at its side. Even with interest rates at all-time lows, Toys ‘R’ Us was spending more than $250m a year servicing some $5bn of long-term debt and that is just not sustainable. This is why value investors spend so much time analysing the financial position of potential investments – including how much debt has been taken on. What we are looking for is a ‘margin of safety’ – or ‘wiggle room’, if you prefer – should things turn sour for a company. Businesses that have a margin of safety have the luxury of time or breathing space to reinvent themselves – and many do precisely that. On an individual basis, if Toys ‘R’ Us had not been so laden with debt then maybe it could have avoided filing for bankruptcy and reinvented itself – or maybe not. But without that margin of safety, it never had the chance to find out. Debt was the killer. The case – eet is solved.