How did $5 billion of debt sink Toys “R” Us?

Model. One company, one year at a time, in dollars of fiscal 2016 (ended January 28, 2017). Profit before interest E = sales × 35.4% gross margin − $3.30B of operating costs, which gives the reported Adjusted EBITDA of $792M on $11.54B of sales. Interest I = debt × rate; the defaults, $4.8B at 9.5%, reproduce the reported $457M. Store upkeep K = $250M (capital spending was $252M). Each year the cash tank changes by E − I − K, starting from $566M of cash. The sales knob keeps operating costs fixed, so a 10% fall in sales takes profit before interest from $792M to about $380M: the same operating leverage that runs a café. The film's real footage, shown as short credited excerpts: a Toys “R” Us sign coming down in 2018, by @toysrusarchive. The numbers come from the model, not from the clips.

Not modeled. Taxes, working capital, store closures, asset sales, refinancing and debt repayments are left out, and the real company did not drain in a straight line: it filed for Chapter 11 in September 2017 with about $400M of debt coming due the next year, and liquidated its US stores in 2018. The film's 10% sales drop is a what-if, not the recorded fiscal 2017 result.

Sources. Toys“R”Us, Inc., Results for the Full Year and Fourth Quarter of Fiscal 2016 (net sales $11,540M, operating earnings $460M, Adjusted EBITDA $792M, interest expense $457M, net loss $36M, capital expenditures $252M, cash $566M) and its fiscal 2016 Form 10-K; Fortune, September 18, 2017 (about $5 billion of debt, about $400 million due the next year); Retail Dive on the 2005 $6.6B leveraged buyout by KKR, Bain Capital and Vornado and the roughly $400M a year of debt service; Wikipedia.