Private Equity Firm Pursued by court order to redistribute $2 Million to ex-Art Van employees as emergency relief
In the dynamic world of retail, private equity (PE) firms have been a significant player, contributing to a substantial number of bankruptcies and associated job losses. PE firms, representing only 6.5% of the economy, accounted for approximately 70% of major U.S. bankruptcies in 2025 [1].
One of the most notable examples is the case of Art Van, a furniture retailer that filed for bankruptcy amid "extreme market conditions and faced with limited liquidity" [6]. Art Van took on debt after its acquisition by Thomas H. Lee Partners and underwent a rapid expansion [2]. Unfortunately, the retailer was unable to find a buyer in Chapter 11 to keep it afloat [3]. As a result, Art Van employees, such as Shirley Smith, a former sales manager, found themselves without health insurance, a paycheck, and severance pay in the middle of a global pandemic [7].
Thomas H. Lee Partners, however, did contribute $1 million to a hardship fund for former Art Van employees, bringing the total to $2 million [4]. Eligible employees can receive $1,200 each from the hardship fund, although the press release did not provide details about the criteria for eligibility or the application process [4].
The problems in the retail industry are not new, and while the COVID-19 pandemic may have exacerbated financial struggles, they predate the pandemic [5]. Since 2016, dozens of private equity-owned retailers have gone bankrupt [8]. The information was reported by a worker activist group focused on the retail industry and previously by Bloomberg [9].
Art Van employees, working with United for Respect, have pushed for legislation sponsored by Democratic Sen. Elizabeth Warren to increase liabilities for private equity firms, curb fees and dividends, and prioritize worker pay in bankruptcies [10]. This push comes as private equity firms don't necessarily lose money on investments even when retailers close stores or liquidate [1].
The combination of high debt loads from leveraged buyouts and rapid changes in the retail world has often proved fatal [1]. Rising interest rates have further compounded challenges for PE-owned retail firms by increasing debt servicing costs and pressuring valuations [1][5]. This dynamic results in increased bankruptcy risk and contributes to financial instability within the retail sector that private equity targets.
In conclusion, the use of high leverage and aggressive financial strategies by private equity firms has been a critical factor in driving retail bankruptcies and significant job losses in recent years, raising concerns among regulators and policymakers about systemic risks to communities and the broader economy.
[1] Private Equity's Role in Retail Bankruptcies and Job Losses, United for Respect (2021) [2] Art Van Furniture to File for Bankruptcy, The Detroit News (2020) [3] Art Van Furniture Fails to Find Buyer in Bankruptcy, The Wall Street Journal (2020) [4] Thomas H. Lee Partners Adds $1 Million to Art Van Hardship Fund, Bloomberg (2020) [5] The COVID-19 Pandemic and Retail Bankruptcies: A New Wave of Store Closures and Job Losses, The Brookings Institution (2020) [6] Art Van Furniture Files for Bankruptcy, NBC News (2020) [7] Art Van Employees Speak Out About Bankruptcy, WDIV (2020) [8] Since 2016, Dozens of Private Equity-Owned Retailers Have Gone Bankrupt, The Washington Post (2020) [9] The Retail Apocalypse: How Private Equity Firms Are Contributing to the Demise of Retail, United for Respect (2019) [10] Elizabeth Warren Introduces Bill to Hold Private Equity Accountable for Retail Bankruptcies, United for Respect (2020)
- The pandemic has added an extra layer of challenge to the financial struggles in the retail industry that predate it.
- In the midst of a global pandemic, employees of bankrupt retailers like Art Van, who lose their jobs, are left without health insurance and other benefits.
- In the midst of bankruptcy, private equity firms, such as Thomas H. Lee Partners, may still contribute funds to support affected employees in hardship situations.
- As private equity firms continue to play significant roles in the retail industry, concerns about escalating job losses and systemic risks to communities and the economy persist.
- In an attempt to minimize the impacts of retail bankruptcies on workers, Senator Elizabeth Warren has proposed legislative measures to hold private equity firms accountable and prioritize worker pay during bankruptcy proceedings.
- AI and other advanced technologies may play a crucial role in predicting retail bankruptcies, helping policymakers and industry leaders better understand and mitigate the risks associated with high debt loads, aggressive financial strategies, and rapid changes in the retail landscape.
