Why the surge in bankruptcies is just beginning

The 2008 financial crisis led to some of the most high-profile bankruptcies in U.S. History, including those of banking titan Lehman Brothers and car maker General Motors.

But the coronavirus pandemic—and its widespread impact—is giving 2008 a run for its money.

“We are seeing an acceleration in bankruptcies that is unprecedented,” James Hammond, CEO of the company that runs BankruptcyData, told me in my story on bankruptcies in the coronavirus era. That comes as car-rental company Hertz has become the biggest Chapter 11 by asset so far, and as oil-and-gas company Chesapeake Energy becomes the latest large-scale fallout.

Experts also believe it could get worse when the government’s Paycheck Protection Program, which aims to keep small businesses up and running with loans that can be converted to grants, runs out.

“I’m pretty confident we will see more bankruptcies than in any business person’s lifetime,” says Hammond.

Of note—academics are already calling for changes in bankruptcy proceedings to meet a potential surge: “Without reform, we anticipate that a significant fraction of viable small businesses will be forced to liquidate,” one group wrote in a letter to Congress calling for greater flexibility among small businesses during the bankruptcy protection process. Another group of scholars called for beefed-up bankruptcy courts, lest the surge in coronavirus-related filings clogs up the pipelines and eats up valuable time for businesses hoping to restructure.

Here is to hoping that, even with these numbers, lessons from 2008 and before will stick—leading to better handling of the bankruptcies. 

America’s second-largest grocer gets a not-so-great IPO: It’s been some 14 years since private equity firm Cerberus first got involved in grocery chain Albertsons, first participating in the breakup of the company in 2006. After a decade and a half, the company is finally going public, but it’s not raising nearly as much as hoped. Initially planning to raise $1.3 billion in proceeds, all of which would have gone to existing investors, the IPO of the company raised $800 million instead. Cerberus, which previously held about 37% of the shares, now holds around 31%.

It’s been a loooong road to an exit for Cerberus: The firm actually doubled down on Albertson’s in 2013, acquiring even more of the chain from one of its partners on the 2006 deal, SuperValu. The private equity firm then tried to take it public in 2015 after merging it with Safeway, but that never materialized. 

In short, pandemic or not, it was about time for its backers.

“It’s so difficult to predict what’s happening in the stock market. There’s so much volatility,” CEO Vivek Sankaran told my colleague, Beth Kowitt. “Some of our investors have been with us for 15 years, so we’ve got to monetize some of that.” Read more.

Lucinda Shen
Twitter: @shenlucinda
Email: [email protected]

Keep an eye out for the 2020 Coins2Day /IBM Watson Health 100 Top Hospitals ranking—to be published tomorrow morning—of the top-performing hospitals nationwide.

Tomorrow, our editor-in-chief Clifton Leaf will also lead a conversation with IBM Vice President and Chief Health Officer Dr. Kyu Rhee, American Medical Association Vice President and Chief Health Equity Officer Dr. Aletha Maybank, St. Joseph Mercy Hospital President Alonzo Lewis, American Heart Association CEO Nancy Brown, and Stanford Health Care President and CEO David Entwistle. 

They’ll talk about how hospitals should be reimagined so that they’re prepared for the challenges to come. Register for the free virtual event here.

VENTURE DEALS

- Zuoyebang,  a Beijing-based tutoring startup, raised $750 million in Series E funding. Tiger Global and FountainVest Partners led the round and were joined by investors including SoftBank’s Vision Fund, Sequoia Capital China, Xiang He Capital, and Qatar Investment Authority. 

- TuSimple, a San Diego-based self-driving truck startup, is seeking to raise $250 million, per TechCrunch. Backers include Sina, Composite Capital, Nvidia, UPS, CDH Investments, and Lavender Capital. Read more.

- Artlist, a Tel Aviv-based provider of a full suite of royalty-free licensed music, stock video clips, and sound effects raised $48 million in funding. KKR led the round and was joined by investors including Elephant Partners.

- Codefresh, a Mountainview, Calif.-based Kubernetes DevOps tools, raised $27 million in funding. Red Dot Capital Partners led the round and was joined by investors including Shasta Ventures.

- Area 1 Security, a Redwood City, Calif.-based email security company, raised $25 million in funding. ForgePoint Capital led the round and was joined by investors including Kleiner Perkins, Icon Ventures, and Top Tier Capital. 

- Cynet, a New York-based autonomous breach protection company, raised $18 million in extended Series B funding. Deutsche Telekom’s Telekom Innovation Pool led the round and was joined by investors including BlueRed Partners, Merlin International, Norwest Venture Partners, and Ibex Investors.

- Airvet, a Los Angeles-based veterinarian startup, raised $14 million in Series A funding. Canvas Ventures led the round and was joined by investors including e.ventures, Burst Capital, Starting Line, TrueSight Ventures, Hawke Ventures, and Bracket Capital. Read more.

- Work Shield, a Dallas-based service for reporting and investigating harassment and discrimination, raised $4 million in Series A funding. Hoak & Co. Led the round.

- CoInspect, a San Francisco-based food safety startup, raised $4 million in seed funding. Active Impact Investments led the round.

- Prisma, an open-source database toolkit for developers, raised $12 million in Series A funding. Amplify Partners led the round and was joined by Kleiner Perkins.

- Arena, a San Francisco, Calif.-based experience and customer data platform, raised $2.3 million in extension seed funding. Redpoint eventures led the round and were joined by investors including Incubate Fund, Plug and Play, and Intango Ventures.

- FlyForm, a London-based ServiceNow partner, raised funding from Lloyds Bank in partnership with Izy Capital. Financial terms weren't disclosed.

PRIVATE EQUITY

- Bain Capital will acquire Virgin Australia, the bankrupt airliner in the country, per Bloomberg. Read more.

- Belmar Pharmacy, a portfolio Company of Webster Equity Partners and MedEquity Capital, acquired APS Pharmacy, a Palm Harbor, Fla.-based provider of pharmaceutical compounding to patients and physicians. Financial terms weren't disclosed.

OTHERS

- Byju’s is in advanced talks to acquire Doubtnut, an Indian education learning app. The deal could value Doubtnut at between $125 million to $150 million, per TechCrunch. Sequoia Capital India backs both. Read more. 

- Eldorado Resorts (NASDAQ:ERI) has U.S. Antitrust approval to buy rival Caesars Entertainment (NASDAQ:CZR), a casino operator, in a $8.5 billion deal as long as it sells casinos in two cities. 

- Luckin Coffee, the Chinese coffee chain facing allegations of fraud, will delist from the Nasdaq after saying it will not contest the decision. 

IPOS

- Dun & Bradstreet, a Short Hills, NJ.-based provider of data analytics services, plans to raise as much as $1.4 billion in an offering of 67.8 million shares priced between $19 and $21. The company posted revenue of $1.4 billion in 2019 and loss of $674 million. A consortium of investors including Bilcar, Thomas H. Lee Partners, Cannae Holdings, Black Knight, and CC Capital Partners took the company private in 2018. It plans to list on the NYSE as “DNB.”  Read more.

- Empreendimentos Pague Menos, a Sao Paulo-based drug store chain, filed for an IPO that could raise as much 1 billion reais to 1.2 billion reais ($223.92 million) in the country. General Atlantic backs the firm. Read more.

- ALX Oncology Holdings, a Burlingame, Calif.-based Phase 1 immuno oncology biotech, filed to raise $100 million. Investors include venBio Partners (30% pre-offering), Lightstone Ventures (15%), and Vivo Capital (12.9%). It plans to list on the Nasdaq as “ALXO.” Read more.

- Berkeley Lights, an Emeryville, Calif.-based drug discovery and development platform, filed to raise $100 million. WRVI Capital (25.5% pre-offering), Sequoia Capital (15%) and Nikon (8.1%) back the firm. It plans to list on the Nasdaq as “BLI.” Read more.

- ACell, a Columbia, Md.-based maker of medical devices, filed to raise $86 million. It plans to list on the Nasdaq as “ACLL.” Read more.

- Pandion Therapeutics, a Waterton, Mass.-based biotech developing engineered T cells for autoimmune diseases, filed to raise $75 million. Investors include Versant Venture Capital (15.9% pre-offering), Polaris Partners (14.7%) and Roche (14.2%). It plans to list on the Nasdaq as “PAND.” Read more.

EXITS

- An affiliate of Wind Point Partners acquired Corbett Technology Solutions, a Townsfield, Md.-based communications solutions provider, from Tower Arch Capital.

- Amazon agreed to acquire Zoox, a Foster City, Calif.-based self-driving startup. Zoox has raised over $1 billion from investors including Lux Capital Management, Grok Ventures, and Tencent.

F+FS

-   Base10 Partners, a venture capital firm, launched a $250 million second fund.

- Aisling Capital, a New York-based life sciences private equity firm, raised $144 million for its fifth fund. Read more.

- VentureWave Capital, a Dublin-based venture fund, is aiming to raise €100 million ($112 million) for Impact Ireland. U2’s David Howell Evans, known as the “the Edge” and Adam Clayton are backing the fund. Read more.

- Hadean Ventures AS, a European venture firm seeking companies that develop treatments for unmet medical needs, has raised $100 million in capital since its debut. Read more.

- Scotts Miracle-Gro, the lawn care company, launched a $50 million corporate venture capital fund called 1868 Ventures. Read more.