Two of the big business collapses of the week have much in common.

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TGIF: It’s been interesting reading the nostalgic paeans on social media to Toys ‘R’ Us, which is closing its roughly 880 stores in the United States, including 16 locations in Washington.

This is a sign that I’ve reached a certain age or grew up outside suburbia. As a child in central Phoenix, I was entranced by local toy stores or the toy sections of locally owned department stores. These were wiped out by Toys ‘R’ Us. It was one of the most successful big-box category killers. This business fad entailed chains of large specialty outlets, surrounded by enormous parking lagoons, with the market power to underprice smaller competitors.

The killer becomes the dead. The chain was done in by online competition, changing shopping habits and debt. Toymakers will pay a hefty price, too, and not in sentimental look-backs.

Speaking of debt, this week also saw iHeartMedia seek bankruptcy protection, owing creditors $20 billion.

A company usually doesn’t get into this kind of mess without “financial engineering,” leveraged buyouts and/or private equity.

Sure enough, Bain Capital (co-founder Mitt Romney) partnered in an LBO of iHeart in 2007. The “leveraged” part of the term means it is financed by taking on immense debt.

Here’s how the hustle is “supposed” to work: Private equity buys ailing — or healthy — firms, provides management expertise to clean up operations and make them more efficient, and takes them public again while pocketing a nice profit. In reality, it often means the financiers suck out the cash flow, slashing jobs and capacity, leaving the ailing firm unable to ever repay its debt. Rip, strip and flip, sometimes multiple times, until the company is gone.

These deals have crushed companies from Simmons Bedding and Texas power company TXU to newspapers, having been a cancer on the American economy since the 1980s. Toys ‘R’ Us was an LBO victim, Bain among the vultures, in 2005. On Thursday, Acon Investments, a D.C. PE outfit (OK, initials getting out of control) bought a 70-percent stake in True Value. Watch out for the neighborhood hardware store.

One more problem with iHeart is its size and a history of snapping up stations.

Starting from one San Antonio radio station in 1972, it bought more stations in Texas and took the name Clear Channel. By the time of its Chapter 11 filing, the renamed iHeart owned 858 stations in more than 150 markets including Seattle. The difference? Media ownership rules were significantly relaxed in the deregulation craze of the 1990s. No longer were the public’s airwaves to be used for public service, but for pure private profits. Robot stations proliferated, too, controlled from afar, with no local knowledge but also no costly DJs.

Have a great weekend. I’ll see you next on Sunday.

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Today’s Econ Haiku:

Trump trading falsehoods

About trade with Canada

A truth deficit

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