Sign up for our daily briefing

Make your busy days simpler with Axios AM/PM. Catch up on what's new and why it matters in just 5 minutes.

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Catch up on the day's biggest business stories

Subscribe to Axios Closer for insights into the day’s business news and trends and why they matter

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Sign up for Axios Pro Rata

Dive into the world of dealmakers across VC, PE and M&A with Axios Pro Rata. Delivered daily to your inbox by Dan Primack and Kia Kokalitcheva.

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Sports news worthy of your time

Binge on the stats and stories that drive the sports world with Axios Sports. Sign up for free.

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Tech news worthy of your time

Get our smart take on technology from the Valley and D.C. with Axios Login. Sign up for free.

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Get the inside stories

Get an insider's guide to the new White House with Axios Sneak Peek. Sign up for free.

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Catch up on coronavirus stories and special reports, curated by Mike Allen everyday

Catch up on coronavirus stories and special reports, curated by Mike Allen everyday

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Want a daily digest of the top Denver news?

Get a daily digest of the most important stories affecting your hometown with Axios Denver

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Want a daily digest of the top Des Moines news?

Get a daily digest of the most important stories affecting your hometown with Axios Des Moines

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Want a daily digest of the top Twin Cities news?

Get a daily digest of the most important stories affecting your hometown with Axios Twin Cities

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Want a daily digest of the top Tampa Bay news?

Get a daily digest of the most important stories affecting your hometown with Axios Tampa Bay

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Want a daily digest of the top Charlotte news?

Get a daily digest of the most important stories affecting your hometown with Axios Charlotte

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Want a daily digest of the top Nashville news?

Get a daily digest of the most important stories affecting your hometown with the Axios Nashville newsletter.

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Want a daily digest of the top Columbus news?

Get a daily digest of the most important stories affecting your hometown with the Axios Columbus newsletter.

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Want a daily digest of the top Dallas news?

Get a daily digest of the most important stories affecting your hometown with the Axios Dallas newsletter.

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Want a daily digest of the top Austin news?

Get a daily digest of the most important stories affecting your hometown with the Axios Austin newsletter.

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Want a daily digest of the top Atlanta news?

Get a daily digest of the most important stories affecting your hometown with the Axios Atlanta newsletter.

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Want a daily digest of the top Philadelphia news?

Get a daily digest of the most important stories affecting your hometown with the Axios Philadelphia newsletter.

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Want a daily digest of the top Chicago news?

Get a daily digest of the most important stories affecting your hometown with the Axios Chicago newsletter.

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Sign up for Axios NW Arkansas

Stay up-to-date on the most important and interesting stories affecting NW Arkansas, authored by local reporters

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Want a daily digest of the top DC news?

Get a daily digest of the most important stories affecting your hometown with the Axios DC newsletter.

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Toys 'R Us closed its flagship store in Times Square in 2015. (RW/MediaPunch/IPX / AP)

When Toys "R" Us filed for Chapter 11 bankruptcy last month, there was a lot of talk about how the company's private equity owners were out the $1.3 billion they invested back in 2005. But it's not exactly true.

Bottom line: Private equity funds can get paid big fees by their own portfolio companies, and don't always distribute those monies to their own investors.

Specifically, I've calculated at least $180 million that Toys "R" Us paid its sponsors in management and advisory fees, not inclusive of an $81 million transaction slug nor fees and interest related to subsequent debt financings. All of that comes via federal regulatory filings.

Assuming the equity check was split evenly among the three sponsors — Bain Capital, KKR and Vornado — it would work out to around $433 million each. Bain has an abnormally high GP commit of 10%, so that means Bain partners paid out around $43 million. But the fund received around $61 million in management and advisory fees related to the deal, which puts it in the black. LPs, of course, were wiped clean. KKR's relevant fund had a 57.5% offset for such fees but a smaller GP commit, so it too brought back more than it sent out. Some alignment of interests.

Caveats: Yes, private equity funds should be judged portfolio-level, and both relevant funds here performed well. Moreover, the sponsors spent tons of time working on Toys "R" Us (i.e., opportunity cost), didn't employ any dividend recaps and LPs knew the offsets (or lack thereof) upon investing. In fact, a Bain source puts its own time spent on Toys at 72,000 hours. But...

Takeaway: We've seen a strong move toward 100% advisory fee offsets in recent years, caused both by LP agitation and SEC scrutiny. Situations like Toys "R" Us are a stark reminder why that trend should continue and never backslide.

Go deeper

Updated 36 mins ago - Health

WHO: Delta health measures help fight Omicron

Photo: Mario Tama/Getty Images

Health measures taken to combat COVID-19 before the emergence of Omicron would also help against the new variant of concern, World Health Organization officials said Friday.

What they're saying: Takeshi Kasai, WHO regional director for the Western Pacific, said during a virtual briefing broadcast from Manila, Philippines, that border controls imposed by the U.S. and other nations can "buy time" to deal with the variant, but warned "every country and every community must prepare for new surges in cases."

2 hours ago - Health

Nevada to impose insurance surcharge on unvaccinated state workers

Nevada Gov. Steve Sisolak. Photo: Ethan Miller/Getty Images

Nevada's Public Employees' Benefit Program Board voted Thursday to charge workers enrolled in public employee health insurance plans a surcharge of up to $55 a month if they're not vaccinated against COVID-19, the Las Vegas Review-Journal reports.

Why it matters: Nevada is the first state to announce such a move, per AP.

Oklahoma sues Biden administration over Pentagon vaccine mandate

Secretary of Defense Lloyd J. Austin testifies before a House Armed Services Committee hearing on Sept. 29 in Washington, D.C. Photo: Olivier Douliery/Pool via Getty Images

The state of Oklahoma filed a lawsuit against the Biden administration on Thursday in an attempt to block the enforcement of its vaccine mandate for federal employees.

Why it matters: The move comes one day after Defense Secretary Lloyd Austin denied Oklahoma Gov. Kevin Stitt's (R) request to exempt the state's National Guard from the mandate.