Private equity behind 65% of billion dollar bankruptcies in 2024

A review by the Private Equity Stakeholder Project (PESP) has found that private equity firms played a role in eleven of the 17 (65%) largest US corporate bankruptcies during the first six months of 2024 (bankruptcies with liabilities of $1 billion or greater at the time of filing).

So far, those bankruptcies have directly resulted in at least 19,700 layoffs across the country, including by: 99 Cents Only (10,800 employees),[1] Careismatic Brands (404 employees),[2] Red Lobster (approximately 6,360 employees),[3] and Steward Health Care (2,143 employees).[4]

That tally does not include significant workforce reductions that companies have made leading up to a bankruptcy filing. For example, healthcare provider Cano Health (owned by InTandem Capital Partners) cut 21% of its workforce, or approximately 842 employees, in the months leading up to its bankruptcy.[5] Craft retailer JOANN (owned by Leonard Green & Partners) also implemented layoffs and closures in the months leading up to its filing.[6]

2024 Corporate Bankruptcies with >$1 Billion in Liabilities

Sources: List of bankruptcy filings based on S&P Global Market Intelligence data[18] as of July 2024. Data on private equity ownership is based on a combination of bankruptcy disclosures, news reports, and data provider PitchBook.

As interest rates remain high, many debt-laden companies with private equity ownership have struggled to remain afloat. Some sectors, especially healthcare, have been particularly affected; of the 40 large healthcare companies that have filed for bankruptcy so far this year, nine companies (23%) were private equity owned. (See here for more on private equity-backed healthcare bankruptcies.)

Bankruptcies can have significant impacts on workers, consumers, and communities, including mass layoffs, closures, and reductions or disruptions in services. Below are a few examples of noteworthy billion-dollar bankruptcies that have happened so far this year.

99 Cents Only – Ares Management and Canada Pension Plan (CPP)
Discount retailer 99 Cents Only filed for bankruptcy in April.[19] Ares Management and Canada Pension Plan bought the company in 2012 for $1.6 billion, financing the deal with $775 million in debt loaded onto the company.[20] As the company struggled under its debt burden over the following years, Ares and CPP embarked on debt restructuring deals in 2017 and 2019 to lower its interest burden.[21]

99 Cents Only is liquidating entirely, including closing all 371 stores across California, Texas, Arizona, and Nevada.[22] The closures will result in the termination of its 10,800 part-time and full-time employees.[23]

Red Lobster – formerly owned by Golden Gate Capital
Restaurant chain Red Lobster filed for bankruptcy in May, citing operational decisions such as an endless shrimp deal as reasons for the company’s distress.[24] While the shrimp fiasco cost the company $11 million, Red Lobster’s bankruptcy can also be traced back to financial pressures stemming from its previous private equity
owner, Golden Gate Capital. PESP’s Valentina Dabos notes:

In 2014, under the ownership of a Golden Gate Capital fund, Red Lobster sold off its premium real estate for $1.5 billion. The private equity firm used that sale to finance its acquisition of Red Lobster, leaving Red Lobster to pay high rents on the properties it once owned. Red Lobster raised $761.97 million during Golden Gate’s ownership, but Golden Gate was no longer on the hook for that debt once they sold their stake in the company. While Golden Gate Capital exited Red Lobster in 2020, this combination of high debt and increased operational costs ultimately led to Red Lobster’s collapse.[25]

Red Lobster has closed 109 locations since filing for bankruptcy and in August announced a plan to close an additional 23 locations.[26] Hundreds of workers have been laid off without notice, including 300 workers in California alone[27] and dozens of workers in New Jersey[28] and Arizona.[29] The total number of layoffs across the country has not yet been disclosed, but may be as high as 6,360 workers (based on the average 60-70 employees per location reported by Red Lobster).[30]

Careismatic Brands – New Mountain Capital
Careismatic Brands is a leading provider of medical apparel, such as medical scrubs and footwear. It is owned by private equity firm Partners Group, which acquired the company from another private equity firm, New Mountain Capital, in January 2021 for about $1.3 billion.[31] Partners Group used over $800 million in new debt to finance the acquisition.[32]

According to WARN Act filings, Careismatic is closing its two Dallas-area distribution facilities and laying off 404 workers,[33] which represents half of the company’s total workforce.[34]

Steward Health Care – formerly owned by Cerberus Capital Management
Steward Healthcare, a hospital chain formerly owned by Cerberus Capital Management, filed for Chapter 11 bankruptcy in May 2024.[35]

The system reported over $9 billion in liabilities in its bankruptcy filing, which included almost $1 billion owed to vendors and medical suppliers and $6.6 billion in long-term lease obligations to its hospital landlord, Medical Properties Trust.[36] Steward’s bankruptcy is one of the largest hospital bankruptcies in decades.[37]

So far the hospital system has announced plans to close two of its Massachusetts hospitals and two of its Ohio hospitals, laying off a total of 2,143 employees.[38] As bankruptcy proceedings, including hospital auctions, remains ongoing, it is not yet clear whether the bankruptcy will result in additional hospital closures or layoffs. However, the company has initiated layoffs and closures in the years leading up to the bankruptcy filing. In an analysis of Steward’s building financial distress, PESPs Mary Bugbee wrote:

Since 2018, Steward has closed six hospitals in the US, resulting in the layoffs of at least 2,650 workers and reduced access to care for the communities they served. Steward has also cut important service lines, such as obstetrics, behavioral health, and cancer care, at others. Two of the hospital closures happened in 2024 when the health system was on the eve of bankruptcy.

Read about Steward’s bankruptcy in our July 2024 report: The Pillaging of Steward Health Care.

LaVie Care Centers/Consulate Health Care – Formation Capital
One of the largest healthcare bankruptcies this year was nursing home chain LaVie Care Centers (aka Consulate Health Care), which filed for Chapter 11 protection in June.[39] LaVie/Consulate operates 43 nursing homes in five states: Mississippi, North Carolina, Pennsylvania, Virginia, and Florida. It has 3,700 long-term residents and 3,600 employees.[40]

LaVie/Consulate is owned by private equity firm Formation Capital[41] through a complex web of dozens of related shell companies.[42]

Resources

[1] 99 Cents Only is liquidating and closing all stores. It reported having 10,800 part-time and full-time employees in its bankruptcy filings (see page 3).

[2] Kelly Stroh, “Careismatic Brands to close Dallas distribution centers, lay off 400 employees,” Supply Chain Dive, May 21, 2024. https://www.supplychaindive.com/news/careismatic-brands-closes-dallas-distribution-centers-404-layoffs/716639/

[3] As of August 2024, 106 Red Lobster locations have closed. A total tally of layoffs has not been publicly disclosed. Based on an average of 60-70 employees per location reported by Red Lobster (see here), PESP estimates that approximately 6,360 workers have been laid off (106 locations x 60 workers per location).

[4] 1,243 layoffs in Massachusetts, 900 layoffs in Ohio. See: Madeline Ashley, “Steward to lay off 1,243 Massachusetts employees amid hospital closures,” Becker’s Hospital Review, August 5, 2024. https://www.beckershospitalreview.com/finance/steward-to-lay-off-1-243-massachusetts-employees-amid-hospital-closures.html ; Caroline Hudson, “Steward to cut more than 900 jobs in another layoff round,” Modern Healthcare, August 23, 2024.  https://www.modernhealthcare.com/providers/steward-health-care-layoffs-closures-warren-ohio-hospitals

Steward was previously owned by private equity firm Cerberus Capital Management between 2010 and 2020. See PESP’s report The Pillaging of Steward Health Care.

[5] Emily Olsen, “Cano Health reduced its workforce by 21% in Q3,” Healthcare Dive, November 10, 2023. https://www.healthcaredive.com/news/cano-health-q3-2023-job-cuts-earnings/699439/

[6] Anthony Russo, “Major craft retailer plans layoffs to save money leaving employees on edge as it’s still without a permanent CEO,” The Sun, September 15, 2023. https://www.the-sun.com/money/9100716/craft-retailer-joann-close-layoffs/

[7] Becky Yerak, “Private-Equity-Owned Medical Apparel Seller Careismatic Files for Bankruptcy,” Wall Street Journal, January 23, 2024. https://www.wsj.com/articles/private-equity-owned-medical-apparel-seller-careismatic-files-for-bankruptcy-357e17e7

[8] “INTANDEM CAPITAL PARTNERS PORTFOLIO COMPANY, CANO HEALTH, WILL BEGIN TRADING TOMORROW ON THE NEW YORK STOCK EXCHANGE “NYSE”,” June 3, 2021. https://intandemcapital.com/news-and-videos/intandem-capital-partners-portfolio-company-cano-health-will-begin-trading-tomorrow-on-the-new-york-stock-exchange-nyse/

[9] “Hornblower emerges from chapter 11,” David Polk, July 10, 2024. https://www.davispolk.com/experience/hornblower-emerges-chapter-11

[10] Riverstone Energy website. https://www.riverstonerel.com/portfolio/enviva/. Accessed August 5, 2024.

[11] Becky Yerak and Will Feuer, “Craft Retailer Joann Files for Bankruptcy After Consumer Pullback,” Wall Street Journal, March 18, 2024. https://www.wsj.com/articles/craft-retailer-joann-files-for-bankruptcy-after-consumer-pullback-6d634c5a

[12] Becky Yerak, “CVC Capital-Backed ConvergeOne Files for Bankruptcy to Cut $1.6 Billion in Debt,” Wall Street Journal, April 4, 2024. https://www.wsj.com/articles/cvc-capital-backed-convergeone-files-for-bankruptcy-to-cut-1-6-billion-in-debt-fec906dd

[13] “Ares and CPPIB-owned 99 cents only stores closes recap deals,” PEHub, July 19, 2019. https://www.pehub.com/ares-and-cppib-owned-99-cents-only-stores-closes-recap-deals/

[14] Madeline Ashley, “Massachusetts lawmakers say Cerberus got $800M profit from Steward exit,” Becker’s, April 3, 2024.  https://www.beckershospitalreview.com/finance/massachusetts-lawmakers-say-cerberus-got-800m-profit-from-steward-exit.html

[15] Julie Littman, “Golden Gate Capital sells remaining stake in Red Lobster,” Retail Dive, August 31, 2020.  https://www.restaurantdive.com/news/golden-gate-capital-sells-remaining-stake-in-red-lobster/584426/

[16] CASE SUMMARY: Dynata Files Prepack With Support From Supermajority of Debt Stack; Plan Would Cut Nearly 40% of Funded Debt, Infuse $81.5M of Liquidity Through DIP and Exit Facilities, Leave GUCs Unimpaired. https://reorg.com/articles/case-summary-dynata-files-prepack/

[17] The bankruptcy petition for LaVie Care Centers names FC Investors XXI, LLC as LaVie’s parent company. FC Investors XXI is also named as an owner in CMS records of many of LaVie’s facilities (and Consulate’s). FC Investors XXI’s SEC Form D filing lists its principal place of business as an address associated with Formation Capital’s corporate headquarters.

[18] Annie Sabater and Sean Longoria, “US corporate bankruptcies in June reach highest monthly level since early 2020,” S&P Global, July 8, 2024. https://www.spglobal.com/marketintelligence/en/news-insights/latest-news-headlines/us-corporate-bankruptcies-in-june-reach-highest-monthly-level-since-early-2020-82297569

PESP made two adjustments to the list of bankruptcies provided by S&P as of July 2024. We removed the bankruptcy filing for Hospitality Syracuse Inc., which has been reported as a fraudulent filing. We added Cano Health, which was missing from the S&P list of largest bankruptcies but meets the classification, as it reported having over $1 billion in liabilities in its bankruptcy filing.

[19] Dietrich Knauth, “Retailer 99 Cents Only files for bankruptcy, plans to shut down,” Reuters, April 8, 2024. https://www.reuters.com/business/retail-consumer/retailer-99-cents-only-files-bankruptcy-plans-shut-down-2024-04-08/

[20] “Approximately $775 million of debt securities rated,” Moody’s Investors Service, December 5, 2011. https://www.moodys.com/research/Moodys-assigns-first-time-ratings-to-99-Only-Stores-CFR-Rating-Action–PR_232212

[21] Soma Biswas, “99 Cents Only Stores Strikes Deal With Sponsors, Creditors,” Wall Street Journal, June 11, 2019. https://www.wsj.com/articles/99-cents-only-stores-strikes-deal-with-sponsors-creditors-11560291064

[22] “99 Cents Only Stores Announces Wind-Down of Business Operations,” PR Newswire, April 4, 2024. https://www.prnewswire.com/news-releases/99-cents-only-stores-announces-wind-down-of-business-operations-302108746.html

[23] Chapter 11 Case for Number Holdings LLC, Case No. 24-10719 (JKS). DEBTORS’ MOTION FOR ENTRY OF AN ORDER (I) IN AID OF SALE ORDER; (II) APPROVING THE ALTERNATIVE PURCHASE AGREEMENTS; AND (III) GRANTING RELATED RELIEF. Doc 1043 filed July 19, 2024. https://cases.ra.kroll.com/99only/Home-DownloadPDF?id1=MjU5MjM0Nw==&id2=-1 Pg. 3.

[24] Eleanor Pringle, “Red Lobster is blaming its bankruptcy on top shareholder and its ex-CEO, saying an $11M all-you-can-eat-shrimp fiasco contributed to its demise,” Fortune, May 21, 2024. https://fortune.com/2024/05/21/red-lobster-unlimited-shrimp-fiasco-bankruptcy/

[25] Valentina Dabos, “Don’t blame the shrimp: How private equity is bankrupting America,” Private Equity Stakeholder Project, June 20, 2024. https://pestakeholder.org/news/dont-blame-the-shrimp-how-private-equity-is-bankrupting-america/.

[26] Natalie Neysa Alund Gabe Hauari, “23 more Red Lobster restaurants close: See the full list of 129 shuttered locations,” USA Today, August 26, 2024. https://www.usatoday.com/story/money/food/2024/08/26/red-lobster-restaurants-closing/74949798007/

[27] Autumn Swiers, “Red Lobster Is Being Sued Over The Way It Handled Layoffs,” Yahoo Finance, June 15, 2024. https://finance.yahoo.com/news/red-lobster-being-sued-over-173835696.html

[28] 60 reported layoffs. State of New Jersey 2024 WARN Notices, accessed August 2, 2024. https://www.nj.gov/labor/assets/PDFs/WARN/2024_WARN_Notice_Archive.pdf

[29] 14 reported layoffs. State of Arizona WARN Notices, accessed August 2, 2024.  https://www.azjobconnection.gov/search/warn_lookups/793

[30] As of August 2024, 106 Red Lobster locations have closed. A total tally of layoffs has not been publicly disclosed. Based on an average of 60-70 employees per location reported by Red Lobster (see here), PESP estimates that approximately 6,360 workers have been laid off (106 locations x 60 workers per location).

[31] Shikhor Wahed, “Partners Group Buys Careismatic from New Mountain,” The Middle Market, January 7, 2021. https://www.themiddlemarket.com/latest-news/partners-group-buys-careismatic-from-new-mountain

[32] Alexander Gladstone, Jodi Xu Klein and Soma Biswas, “Medical Apparel Supplier Careismatic Hires Restructuring Advisers,” Wall Street Journal, January 11, 2024. https://www.wsj.com/articles/medical-apparel-supplier-careismatic-hires-restructuring-advisers-1508dd1b

[33] Kelly Stroh, “Careismatic Brands to close Dallas distribution centers, lay off 400 employees,” Supply Chain Dive, May 21, 2024. https://www.supplychaindive.com/news/careismatic-brands-closes-dallas-distribution-centers-404-layoffs/716639/

[34] In its bankruptcy filings, Careismatic reports having 800 employees. See: https://dr201.s3.amazonaws.com/cbi/CBI%20-%20Disclosure%20Statement.pdf (pg. 24).

[35] E. Harrison, L. Creamer, and P. McCluskey, “Steward Health Care Seeks Bankruptcy Protections,” WBUR, May 6, 2024, wbur.org/news/2024/05/06/steward-bankruptcy-massachusetts-for-profit-hospitals-debt.

[36] M. Ashley, “Steward Plans Sale of All Hospitals, Reports $9B in Debt,” Becker’s Hospital Review, May 7, 2024, beckershospitalreview.com/finance/steward-plans-sale-of-all-hospitals-reports-9b-in-debt.html.

[37] S. Vogel, “Steward Health Care Files for Chapter 11 Bankruptcy,” Healthcare Dive, May 6, 2024, healthcaredive.com/news/steward-health-care-files-chapter-11-bankruptcy/714050.

[38] 1,243 layoffs in Massachusetts, 900 layoffs in Ohio. See: Madeline Ashley, “Steward to lay off 1,243 Massachusetts employees amid hospital closures,” Becker’s Hospital Review, August 5, 2024. https://www.beckershospitalreview.com/finance/steward-to-lay-off-1-243-massachusetts-employees-amid-hospital-closures.html ; Caroline Hudson, “Steward to cut more than 900 jobs in another layoff round,” Modern Healthcare, August 23, 2024.  https://www.modernhealthcare.com/providers/steward-health-care-layoffs-closures-warren-ohio-hospitals

[39] Dietrich Knauth, “US nursing home operator LaVie files for bankruptcy to downsize, shed debts,” Reuters, June 3, 2024. https://www.reuters.com/legal/litigation/us-nursing-home-operator-lavie-files-bankruptcy-downsize-shed-debts-2024-06-03/

[40]https://www.kccllc.net/lavie/document/2455507240603000000000003 pg. 3-4, 10-11.

[41] The bankruptcy petition for LaVie Care Centers names FC Investors XXI, LLC as LaVie’s parent company. FC Investors XXI is also named as an owner in CMS records of many of LaVie’s facilities (and Consulate’s). FC Investors XXI’s SEC Form D filing lists its principal place of business as an address associated with Formation Capital’s corporate headquarters.

[42] Chapter 11 Bankruptcy for LaVie Care Centers. Case No. 24-55507 (PMB). DECLARATION OF M. BENJAMIN JONES IN SUPPORT OF CHAPTER 11 PETITIONS AND FIRST DAY PLEADINGS. https://veritaglobal.net/lavie/document/2455507240603000000000003

Page 19:  “As reflected in the organizational chart attached hereto as Exhibit A, LaVie is a

wholly-owned subsidiary of Debtor LV Operations II, LLC, which is a wholly-owned subsidiary

of LV Operations I, LLC (‘LVO I’). Debtor LVO I, LLC is a wholly-owned subsidiary of nonDebtor LaVie HoldCo, LLC, whose ultimate parent is non-Debtor FC Investors XXI, LLC (‘FC

XXI’).”

See also LaVie Care Centers, LLC Organizational Structure charts, pages 46-53.