fortune--2020-05-11--A new bankruptcy law could prove a big help for small businesses. Here’s everything you need to know

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As the coronavirus shutdowns continue to strain companies across the U.S., many small businesses are now facing a tough decision: whether or not to file for bankruptcy.
While programs like the Paycheck Protection Program and Economic Disaster Injury Loans (via the Small Business Administration) have attempted to save employees and keep businesses alive, new data suggests that 43% of small businesses in the U.S. could shutter permanently in the next six months, according to a poll by the U.S. Chamber of Commerce. It’s what Amanda Ballantyne, executive director of Main Street Alliance, an advocacy group for small business, told The New York Times was “a crisis that will impact our economy for generations. We’re going to lose so much of the small-business sector.”
Yet bankruptcy could help many of these companies survive the pandemic—especially as a new law makes it easier for small businesses to access it. In previous years, reorganizing via bankruptcy was less tenable for small businesses. Chapter 11, which is basically a reorganization of the business, has long been what attorneys like Lance Martin, a bankruptcy lawyer at Ward and Smith, classify as an “onerous and expensive and lengthy process.” The original Chapter 11 is more “intended for railroads and big business and airlines and Sears,” says Andrew Houston, a partner focused on bankruptcy at Moon Wright & Houston, based in North Carolina.
But in February, a new subchapter was serendipitously added to Chapter 11, under the Small Business Reorganization Act (SBRA), called Subchapter 5—which caters to small businesses whose time and resources are more limited. The new code significantly cuts down on the time and money typical bankruptcy cases take. Under the code, companies with under $2.7 million in debt can be eligible—And now, as part of the $2.2 trillion CARES Act, that threshold is raised to $7.5 million for one year to cover more businesses.
For many of those small businesses right now, bankruptcy might be a beneficial option. “It’s kind of like making a calculated retreat. You’re retrenching, you’re going to figure out what’s the core of your business that was profitable,” says Amy Vulpio, a bankruptcy attorney at law firm White and Williams, based in Pennsylvania.
For small businesses who may need to consider this option in the near future, Fortune asked three attorneys what you should consider.
Is bankruptcy going to help me save my business?
Lawyers say a key thing to consider when thinking about bankruptcy is which tools it can offer your business, and which it can’t.
Chapter 11 bankruptcy is designed to help you restructure your business, which can help in reducing (or eliminating) debt, focusing on profitable parts of the business, selling off parts, and buying time to reconfigure operations. It won’t, however, attract customers or help you generate revenue.
“It’s not going to fix problems like if they didn’t have any customers before the bankruptcy or before [COVID-19],” says Vulpio.
Part of filing for bankruptcy is creating a business plan outlining your projected income and how you’ll pay your creditors back. Bankruptcy is intended to help companies that will be able to stay cash flow positive once their debts are reduced or eliminated, so that is key to consider beforehand. “You really need to do some pre-bankruptcy planning to think about, how can you generate revenue on a going-forward basis to support a plan that’s going to be feasible?” notes Martin. Especially coming out of coronavirus shutdowns, businesses need to have a clear picture of how they can snapback their business and generate enough revenue, and how reorganizing via bankruptcy could help them reach those goals.
What are the benefits of bankruptcy?
The primary benefit of bankruptcy is straightforward: through something called the ‘automatic stay,’ filing for bankruptcy stops all your creditors from coming after you.
“If you’re being foreclosed on or your landlord is trying to evict you or you’re being sued, all of that has to stop and all of the creditors have to come in and deal with you in the bankruptcy court,” Martin tells Fortune. “It eliminates death by a thousand cuts if you’re fighting a battle on several different fronts.”
For many small businesses unable or struggling to stay open right now, like retailers, bars, and restaurants, bankruptcy might be a good way to get through some uncertainty by pausing or getting rid of some of their obligations—especially leases, Vulpio points out.
Will I have to pay back all my debts?
But, of course, you will have to present a plan on how you’ll repay your creditors. A major provision in Subchapter 5 is that debtors can restructure (or eliminate) debt by using their projected disposable income (net operating income) to pay creditors back over three to five years.
“Just think about it like a payment plan with your creditors,” notes Houston.
As part of a bankruptcy plan, businesses will have to propose what they project they’ll have as disposable income over the next three years, and how it will be doled out to different creditors. “If you comply with a plan like that, then you can essentially eliminate your debts after a three to five year period,” Martin says.
Will I still own my business after bankruptcy?
In a regular Chapter 11 reorganization, business owners would typically need to get new funding to confirm their bankruptcy plan, and they usually don’t get to keep a stake in the reorganized business unless debts are repaid in full.
One notable change in Subchapter 5: small business owners can keep their equity, meaning they’re still able to hold on to their business, as long as they distribute their disposable income to creditors over the next three to five years.
That’s a huge plus for small business owners (who often own more of their business than a large company with many shareholders) and gives business owners a much better shot at keeping their equity interest. “That’s the whole point here, to rehabilitate,” Vulpio notes.
Do my creditors have to approve my plan?
Unlike regular Chapter 11, under Subchapter 5 you don’t need creditors to vote to approve your reorganization plan: “You just have to meet certain thresholds that exist regarding how you treat secured and unsecured creditors,” Houston points out, and get the court to approve your plan based on that criteria. That makes the process a lot more debtor-friendly, attorneys say.
Plus, one benefit of Subchapter 5 is that businesses are provided a special Subchapter 5 trustee, which basically acts as a mediator between the debtor and creditors. “If you’re a mom-and-pop, the Subchapter 5 trustee is going to be there to hold your hand and your attorney’s hand through the process,” says Martin.
How will bankruptcy affect PPP loans?
There’s no promise of future loan or stimulus programs like the Paycheck Protection Program, but it is important to note that businesses that have filed for bankruptcy aren’t eligible for the PPP loan under current (and changing) SBA guidelines.
If future rounds of stimulus (in whatever forms they take) do become available, bankruptcy might make it harder to access those, Vulpio suggests. Yet, she maintains: “Businesses have to make the best decision with the information they have now and try not to get hung up on what could hypothetically happen.”
Meanwhile, Houston believes business owners need to think about their immediate needs: “If you’re three months behind on your rent, or you owe money to trade creditors, et cetera, the PPP proceeds aren’t going to help you very much.”
For those businesses who already have a PPP loan and are considering filing for bankruptcy, things get pretty fuzzy. According to Vulpio, “Once you’ve had the funds, it appears you can then file, but all these rules are constantly changing.” Current SBA guidelines indicate that if an applicant is a debtor in a bankruptcy case at the time they apply for the PPP loan or before funds are distributed, they need to notify their lender and cancel their application, but there hasn’t been clear guidance about what happens after you receive funds.
What if I just want to walk away from my business?
In that case, you’re looking at a Chapter 7 bankruptcy, where “you’re essentially walking away from your business,” says Vulpio. Individuals and businesses can use Chapter 7 to wipe out debt, but they’re also liquidating the business.
Most businesses likely don’t want to have to shutter when put in a difficult situation like the coronavirus crisis. But there will be businesses whose best option is to walk away—and that’s where Chapter 7 comes in.
Another path is that a business can decide to turn a Chapter 11 into a Chapter 7 if they decide midway the business isn’t viable to keep running. Adds Martin: “Any business owner needs to think long and hard about the viability of their business on the going-forward basis. If they’re determined that, ‘we were limping along before the virus or we were ready to retire’ or whatever it is, and they don’t think that the business can survive or they can sell the business in this market, then Chapter 7 may be an option.”
Will I need to file for personal bankruptcy too?
Plenty of small businesses use personal guarantees or collateral to back up loans. But filing for Chapter 11 for your business won’t necessarily stop your creditors from coming after you.
When weighing the option of filing for bankruptcy, small business owners should consider “where their personal liability is vis a vis the business,” and what kind of personal guarantees or collateral they have in loans, notes Martin. Some business owners may need to file personal bankruptcy too, in order to help restructure their own debt. In fact, Subchapter 5 and Chapter 11 are also available to individuals whose debts are mainly tied to commercial or business activities.
However, there is an opportunity under Subchapter 5 to modify certain residential mortgages for small business owners if used as collateral for business loans. But if you’re filing for Chapter 7, you might have less luck.
Keep in mind…
All the experts Fortune spoke to stressed that bankruptcy should always be a last resort. Martin highly recommends working with your creditors to try to come to some agreement, deferment, or payment plan outside bankruptcy court: “That will save you time and money,” he says. Plus, creditors would “much rather just get paid, and if they have to modify their loans or defer for a time, I find they’re inclined to do that.”
If you’re thinking about future growth, you’ll need to work it into your plan—”One of the questions I hear debtors have is, ‘well how do we then build something in for future growth? We want to be able to grow the business, does this tie up all the money we could possibly use for that?'” Vulpio says. She suggests having that be part of the thought process for your plan in bankruptcy proceedings.
One plus for Subchapter 5 is the process will likely be faster, but that also might put some small businesses in a time crunch to get the right documents in order. Debtors now have to file a Chapter 11 (Subchapter 5) plan within 90 days of filing for bankruptcy (it used to be 120 days). If you do need to file, it’s going to go quick—so Martin suggests doing some pre-planning with your CPA beforehand.
And while the word “bankruptcy” does carry a lot of negative connotations, some attorneys note that the stigma likely won’t be quite the same during coronavirus. Unlike the slew of bankruptcies that followed the 2008 financial crisis, Martin says “This situation feels different. It feels like businesses have been caught in a buzzsaw” amid government-enforced shutdowns. He adds: “I’d like to think that the capital markets and banks and investors and other businesses are going to frankly be pretty understanding that some businesses may have had no choice.”
This story has been updated to include an attribution to the New York Times.
More must-read finance coverage from Fortune:
—Saving lives vs. saving the economy is a false tradeoff, economists say
—ExxonMobil’s CEO is banking on a return to normal, but most others aren’t so sure
—Cybercriminals adapt to coronavirus faster than the A.I. cops hunting them
—How cannabis purveyors are coping during the pandemic
—Inside the chaotic rollout of the SBA’s PPP loan plan
—Listen to Leadership Next, a Fortune podcast examining the evolving role of CEO
—WATCH: Why the banks were ready for the financial impact of coronavirus
Subscribe to How To Reopen, Fortune’s weekly newsletter on what it takes to reboot business in the midst of a pandemic


fortune--2020-05-11--Investors brush off brutal jobs data, but is it enough to keep the stocks rally alive?

A new bankruptcy law could prove a big help for small businesses .
Here ’ s everything you need to @

This is the web version of the Bull Sheet, Fortune’s no-BS daily newsletter on the markets. Sign up to receive it in your inbox here.
Good morning, Bull Sheeters. Early gains are starting to fade, but investors seem unfazed by last week’s grim job numbers.
Let’s see where investors are putting their spare cash.
Markets update
Asia
The major indices are mixed to start the week. Japan’s Nikkei and Hong Kong’s Hang Seng were up; Shanghai was narrowly lower.
to start the week. Japan’s and were up; was narrowly lower. New follow-the-money data reveals Chinese investment in the U.S. is down significantly so far in 2020; looking the other way, U.S. companies are investing in China at nearly the same clip as a year ago. Watch for this investment gap data to get some attention in Washington.
in the U.S. is down significantly so far in 2020; looking the other way, are investing in China at nearly the same clip as a year ago. Watch for this investment gap data to get some attention in Washington. Complicating matters, the Trump Administration wants U.S. companies to ditch Chinese suppliers and completely rethink their supply chains .
to ditch Chinese suppliers and completely . There are at least two new clusters of COVID-19 infections in Wuhan ; South Korea too is trying to corral an outbreak linked to a “party” district in Seoul.
of infections in ; too is trying to corral an outbreak linked to a “party” district in Seoul. Rocked by low oil prices, Saudi Arabia is instituting 100 billion riyals ($26.6 billion) worth of austerity measures to shore up state finances. The Saudi stock exchange, the Tadawul, was down about 3% on the news.
Europe
European bourses were higher out of the gates, before sinking. London’s FTSE was clinging to gains, while the benchmark Stoxx Europe 600 dipped into the red in the second hour of trading.
bourses were higher out of the gates, before sinking. was clinging to gains, while the benchmark dipped into the red in the second hour of trading. The sparks continue to fly across the EU. The European Commission has warned Germany it may sue over last week’s German high court ruling challenging the ECB’s monetary authority. Reminder: the German court ruling could really mess with the central bank’s ability to roll out QE stimulus in a time of crisis.
has warned it may sue over last week’s German high court ruling challenging the ECB’s monetary authority. Reminder: the German court ruling could really mess with the central bank’s ability to roll out in a time of crisis. “The final word on EU law is always spoken in Luxembourg. Nowhere else,” Ursula von der Leyen , the German-pol-turned-EC-president, said in defense of the European Court of Justice .
, the German-pol-turned-EC-president, said in defense of the . Further rollback of lockdown measures go into effect in France today.
go into effect in today. Meanwhile, the COVID-19 death tolls in France, Italy, Spain and the U.K. fell over the weekend to the lowest levels since March as Europe proceeds with its plan to gradually restart the economy.
U.S.
The Dow , S&P 500 and Nasdaq futures have been up and down all morning, but are now solidly negative.
, and futures have been up and down all morning, but are now solidly negative. The Nasdaq aims to extend its rally to a sixth day today. The tech-heavy index is up 1.7% year-to-date.
aims to extend its to The tech-heavy index is up year-to-date. “ The worst is yet to come ,” Minneapolis Fed’s Neel Kashkari warned on Sunday following the latest unemployment figures. The noted dove wants Congress to pass another stimulus package to help Americans and businesses.
,” Minneapolis Fed’s Neel Kashkari warned on Sunday following the latest unemployment figures. The noted dove wants Congress to pass another stimulus package to help Americans and businesses. House Speaker Nancy Pelosi appears ready to answer that call. The House is expected to release a draft this week of a giant new stimulus bill, which could include at least $750 billion in aid to state and local governments, and individual Americans.
appears ready to answer that call. is expected to release a draft this week of a giant new stimulus bill, which could include at least in aid to state and local governments, and individual Americans. Baseball fans, MLB will meet today to discuss a possible resumption of the season. If the German professional soccer season can restart (or at least, discuss restarting), surely baseball can. Abolish mound visits, I propose.
Elsewhere
Gold is down.
is down. The dollar is up.
is up. Crude is down. WTI had its second best week of 2020, climbing $25%. It’s down close to 3%, however, slipping back below $24/barrel.
Wipeout
The Dow Jones Industrial Average climbed 455 points on Friday, closing up nearly 2% on the day. It’s now 33.5% above its mid-March low. In that time, millions of Americans have lost their jobs, companies have filed for bankruptcy or gone bust, and economists have revised downward their growth forecasts for 2020.
Losing 20.5 million jobs (and the real decline is probably worse that that) is bad, but just how bad? The wipeout is more or less equivalent to the destruction of all the jobs gained over the past decade. The greatest jobs-creation boom in American history is over. It took just one month.
The most optimistic observer will tell you these jobless numbers, as bad as they are, are a bit skewed. There is a larger than usual tally of temporary jobs lumped into that number, they note, and that, once the economy starts to reopen, the out-of-work will get back to their jobs and the unemployment rate will sink again. But many economists aren’t so sure.
As Berenberg told investors in a note on Friday afternoon, “The number of persons on temporary layoff/furlough increased by 16m to 18m in April, accounting for the bulk of total unemployment. Some of these persons will return to work once businesses reopen, but some temporary layoffs will become permanent as businesses face soft demand, close permanently, or as they operate at reduced capacity to ensure social distancing.”
For now, the markets are taking the optimistic view. The huge gains in equities in recent weeks suggests investors see the job losses, the furloughs, the business closings—historic as they are—as a temporary setback. They’re confident the trillions committed in stimulus measures will act as a safety net for the consumer, the engine of the economy. And thanks to the Fed’s super accommodative policies, equities look like a can’t-lose bet.
Still, it’s an investment strategy that involves some risk. The recovery is dependent upon public health conditions improving. It’s also dependent upon public confidence improving—confidence that it’s safe to go to work, to go back to school, to take public transportation, to go shopping or dine out. This return to normal could be frustratingly staggered. It will be uneven across regions and industries.
Until then, investors will be focusing on the progress we’re making to get back to normal. It will be choppy. As such, U.S. futures are faltering, as I type.
***
Postscript
On the weekends, I usually get up early, pop on my bike and pedal out of town. The route involves cutting past the early-Christian catacombs, cycling by the ancient villas on the Appia Antica, and following the aqueducts towards the Castelli Romani, the volcanic cone that looms above the city.
The Appia Antica with the Castelli caldera in the distance. Original photo: Bernhard Warner.
Even under the more relaxed lockdown measures, much of my favorite route is still cut off. The catacombs leg is off-limits, for example. And on Saturday, police were patrolling the parks with such rigor that I was forced to make a series of detours to get to where I wanted to go.
It was good to be out on my bike though.
In early March, the city closed the parks, and any excursion far from home was a fine-able offense. Those measures were relaxed last Monday, May 4. And so it was good to see the Eternal City up close, astride two wheels.
Next Monday more openings are scheduled, including the entry into the catacombs. Non vedo l’ora, as the Italians say. I can’t wait!
Have a nice day everyone. I’ll see you here tomorrow.
Bernhard Warner
@BernhardWarner
Bernhard.Warner@Fortune.com
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Today's reads
Attention, Disney shareholders. It's been a little over a year since Disney landed the mega studio, 21st Century Fox, for a whopping $71.3 billion. Was it worth it? Fortune's Shawn Tully pores through Disney's latest financials (from last week) and reaches a verdict Disney shareholders probably won't care for.
A buyer's market? You'd think with mortgage rates at these rock-bottom lows it would be an ideal time to trade up your rental for a new home. Not so fast. Lenders have dramatically tightened credit requirements, locking all kinds of homebuyers out of the market. One model shows that mortgage credit availability has plunged by more than 25% since the U.S. outbreak of the coronavirus.
(Some of these stories require a subscription to access. To enjoy unlimited access, subscribe today. Thank you for supporting our journalism.)
Market candy
A to Zoom
Last month, the SEC halted trading in ZOOM, the ticker, not the ubiquitous video chat company—that one's called Zoom Video Communications (ticker symbol: ZM)—because too many investors had mistakenly bought shares in the former when they were really looking to invest in the latter. Confused?... Turns out there's a whole zoo worth of Zooms or Zoom-sounding Zooms out there in startup land. "There’s Zoomd, Zoomi, Zumi, Zoomy, Zoomies, Zoomin, Zoomvy, Zoomly and Zoomph. Zoom.ai offers virtual assistants, Xoom is a payments service, and Zumobi does mobile content marketing," writes Erin Griffith for the The New York Times. Please, don't confuse them.


fortune--2020-05-11--The pandemic widens rifts; businesses need to help heal them

This is the web version of CEO Daily. To get it delivered to your inbox, sign up here.
Good morning.
The Business Roundtable’s statement last August redefining the purpose of a corporation (background here) was rightly seen as a seminal moment for “stakeholder capitalism.” But after talking with numerous CEOs on this topic, I remained unsure whether they saw it as significant change, or simply a description of the status quo.
Our new survey of Fortune 500 CEOs provides the answer. We asked the CEOs which of the following comes closest to their view of the Business Roundtable statement:
1. I agree with the statement and believe most good companies always have operated that way. Nothing changed.
2. I agree with the statement, and believe it represents a significant change in corporate thinking from a decade or two ago.
3. I don’t agree with the statement.
Only 4% of the CEOs chose the last answer–giving final burial to Milton Friedman’s notion that the social responsibility of business was to make a profit. But 63% chose the first one, suggesting the Roundtable statement reflected the status quo. Only 25% saw it as a significant change.
Count me with that second group, even though they are a minority. Having covered business as a journalist for four decades, I firmly believe something different is going on today in the way the best CEOs think and talk about their responsibilities to society. And that’s a good thing. The current pandemic is likely to widen the rifts that have plagued Western society in recent years—between knowledge workers and manual workers, the well-educated and the less-well educated, top tier cities and the rest. Businesses will need to play a bigger role in healing those rifts, or risk losing their operating licenses.
Also in the poll, we asked the CEOs whether the pandemic would:
1. Accelerate the move toward stakeholder capitalism, in order to address the human suffering caused by the crisis.
2. Slow the move toward stakeholder capitalism, as companies focus on shoring up their bottom lines.
3. Have no effect on the move toward stakeholder capitalism.
Almost half chose the first option, while just 18% chose the second. I hope they are right. The future of capitalism hangs in the balance.
More news below. Full results of the CEO poll will be out next Monday, as part of our annual Fortune 500 issue.
Alan Murray
@alansmurray
alan.murray@fortune.com
TOP NEWS
Bankruptcies
The latest Chapter 11 bankruptcy filings come from Colombian carrier Avianca—the world's second-oldest extant airline after KLM—and Stage Stores, the discount department store operator. Stage Stores will try to sell assets while it winds down its business; Avianca is trying for a reorganization, though it recognizes that it could well go bust. Fortune
China trade
China's purchases of U.S. goods could fall substantially short of what was agreed in the countries' "phase one" trade deal, according to the Center for Strategic and International Studies—as in, $60 billion for 2020, rather than $186.6 billion. The think tank says the predicted scale of the shortfall is a worst-case scenario that could be avoided if economies rebound later this year, but there will be a shortfall either way. CSIS trustee chair Scott Kennedy: "The targets were never realistic; they were just gaudy numbers meant to impress. The pandemic made the unrealistic the impossible." CNBC
U.S. jobs
Trump administration officials are warning that the U.S. unemployment rate could top 20% this month. Treasury Secretary Steven Mnuchin even says the figure could be in the region of a Great-Depression-esque 25%. According to the Bureau of Labor Statistics, the U.S. economy lost 20.5 million jobs in April. CNN
Reopening doubts
Some Chinese and South Korean authorities have had to reinstate tight lockdown restrictions due to fresh COVID-19 outbreaks. Germany, too, is also experiencing a rise in infection rates. The developments demonstrate just how cautious everyone is going to have to be as lockdowns are liften—and the fact that what goes down might unfortunately go up again, with consequences no-one wants to see. Financial Times
AROUND THE WATER COOLER
Life insurance
Some insurers in the U.S. are turning away those seeking life insurance, because of low interest rates. In other words, they don't want the business because at the moment it wouldn't be profitable enough. In some cases, insurers won't sell life insurance to people aged 70 or older, because they are at a higher risk of dying in the coronavirus pandemic. Wall Street Journal
Europe vs Germany
Remember that bombshell ruling from Germany's constitutional court last week, that threw out a ruling by Europe's highest court about the legality of a European Central Bank's bond-purchase program? The European Commission is absolutely livid and could sue Germany over it—that's according to its president, Ursula von der Leyen, who is of course German. Reuters
Car pitch
Desperate to reignite customer demand for cars, Volkswagen is offering improved leasing and financing terms—and payment protection insurance for potential buyers who fear they might soon lose their jobs. VW brand sales chief Juergen Stackmann: "We want to provide a first strong stimulus so that customers come to dealerships again. According to market research institute GfK, consumer sentiment has reached an historic low in April. We need instant measures that have a positive effect on the consumer climate." Bloomberg
Rock on
Live-music event organizers in Europe are reviving the old-fashioned drive-in model to keep concerts and raves going in the era of social distancing. In some cases, the new model could even make for a viable business—while also introducing new opportunities for creativity and opening up the festival experience to those who might previously have stayed away. Fortune
This edition of CEO Daily was edited by David Meyer.


fortune--2020-05-11--New FDA-approved antigen test for coronavirus is a ‘game-changer,’ ex-chief Scott Gottlieb says

U.S. approval of a new antigen test to rapidly screen people for the coronavirus “is a real game-changer,” said the former head of the U.S. Food and Drug Administration.
The emergency use authorization — the first ever by the FDA for a Covid-19 antigen test — was granted to San Diego-based Quidel Corp. late Friday, according to a notice from the agency.
The move could mark a breakthrough in screening for the virus and comes as state and local governments ease lockdown orders and businesses begin reopening across the nation — and as health professionals argue that swift screening is essential to temper new outbreaks.
“It’s a very rapid test that could be used in a doctor’s office,” former FDA Commissioner Scott Gottlieb said Sunday on CBS’s “Face the Nation.” “Doctors now have about 40,000 of these Sophia machines already installed in their offices” where they are used to test for strep throat and flu, he said.
Each test will probably cost about $5, with results available within minutes, said Gottlieb, now a special partner at New Enterprise Associates, a venture capital firm that invests in the health-care and biotech sectors.
A big challenge will be what guidance is made by U.S. authorities about how doctors test in their offices, he said: “If turning over a positive case in your medical office means that you have to do a deep cleaning and quarantine your nursing staff and close your office, doctors aren’t going to be testing.”
Wanted: Innovation
Dr. Deborah Birx, a member of the White House coronavirus task force, said in April that a “breakthrough innovation” in antigen testing was needed to speed reopening of the U.S. economy.
“We have to be able to detect antigen, rather than constantly trying to detect the actual live virus, or the viral particles itself, and to really move into antigen testing,” Birx said April 26 on NBC’s “Meet the Press.”
Existing diagnostic screening for active infections relies on polymerase chain reaction tests designed to detect genetic material from Covid-19. While accurate, those tests take time to run and analyze.
By contrast, tests like the just-approved Quidel one are meant to rapidly deliver results by detecting antigens — the proteins located on the outer surface of the coronavirus that trigger an immune response in the body.
False Negatives
Antigen tests can generally be produced at a lower cost than their slower-to-analyze PCR competitors, and their simpler design could allow manufacturers to produce enough to test millions of Americans per day, the FDA said in a news release.
While test results can come within minutes, the FDA warned that they’re far from foolproof, with a higher chance of false negatives. The World Health Organization has made similar observations.
The newly-approved test is about 85% sensitive, said Gottlieb. In other cases, doctors who suspect a patient may have Covid-19 would order one of the PCR-based tests, which take about 24 hours to deliver results, he said.
The FDA said it expects more antigen tests to be authorized for Covid-19, and the agency said it would provide a template to guide future approvals.
A third type of tests — antibody tests — use blood to look for proteins that are markers of a previous coronavirus infection. They work by identifying antibodies that were produced by the body’s immune system in response to an earlier infection. Although they can detect an active infection, the FDA says these serological, or antibody, tests should not be used that way.
Shares in Quidel have more than doubled in 2020 so far, closing Friday at $158.60, driven by optimism about the diagnostic health care company’s role in Covid-19 testing.
The new approval is specifically for Quidel’s Sofia 2 SARS Antigen FIA.
More coronavirus coverage from Fortune:
—The Rebuild Program: A project to help small businesses reopen amid a pandemic
—What France’s “patient zero” doctor wants you to know about COVID-19
—McConnell focuses Senate on conservative judge appointments rather than coronavirus
—Photo essay: What life looks like in Europe as the continent starts to reopen
—Trump’s demand that China pay coronavirus reparations evokes an ugly history
—To reopen safely, the private and public sectors need to ramp up collaboration
—Uber’s food delivery helps cushion the blow of COVID-19 on rides business
—PODCAST: How Marc Benioff is helping out during the coronavirus pandemic
—WATCH: Fortune’s top 10 heroes of the coronavirus pandemic
Subscribe to How To Reopen, Fortune’s weekly newsletter on what it takes to reboot business in the midst of a pandemic


fortune--2020-05-11--The world’s second-oldest airline has gone bankrupt

Avianca Holdings SA, one of the biggest carriers in Latin America, filed for Chapter 11 bankruptcy after travel bans across the region forced the Colombian airline to ground its fleet.
Avianca, which counts United Airlines Holdings Inc. and Kingsland Holdings as stakeholders, filed for protection from its creditors in the Southern District of New York, according to court papers. It listed as much as $10 billion in liabilities and the same amount in assets. The company said it will not make bond payments due Monday.
The carrier grounded planes in late March after governments across Latin America sealed borders to curb the spread of the Covid-19 pandemic. Avianca had just emerged from a tumultuous year in which it restructured debt and embarked on a business turnaround plan aimed at restoring profitability by focusing on flights through its Bogota hub. It cited the impact of the pandemic in a statement Sunday, adding that it intends to keep flying during the reorganization.
“Avianca is facing the most challenging crisis in our 100-year history as we navigate the effects of the Covid-19 pandemic,” Chief Executive Officer Anko Van Der Werff said in the statement. “We believe that a reorganization under Chapter 11 is the best path forward to protect the essential air travel and air transport services that we provide across Colombia and other markets throughout Latin America.”
Quick and Orderly
In late March, the company deferred lessor payments, canceled planned investments and offered unpaid leave to the majority of its 21,000 employees to cut costs. The company also delayed filing its annual report until June and said it will include a warning that there’s substantial doubt about Avianca’s ability to stay in business.
By filing for protection in New York, the company laid out a clearer path for its creditors, said Roger Horn, a senior emerging markets strategist at SMBC Nikko Securities America in New York.
“Unlike with so many messy Latin American bankruptcy situations, at least a U.S. filing is quick and orderly and allows for debtor-in-possession financing,” he said. “Avianca could have a chance of coming out of this crisis actually operating as an airline.”
The bankruptcy will be felt widely in the rest of the struggling airline industry, with providers of aircraft, jet engines and maintenance services among Avianca’s biggest unsecured creditors. The documents show more than $30 million each is owed to IAE International Aero Engines AG and General Electric & CMF International. Over $28 million of obligations are listed for Rolls Royce Plc.
Lufthansa Group is owed $4.44 million, a unit of Boeing Co. is due $3.66 million and Airbus claims total $2.83 million.
Skipped Payments
Avianca will not pay a $65.6 million bond maturity or make a coupon on bonds due in 2023, Chief Financial Officer Adrian Neuhauser said in an online briefing Sunday evening. The payments are due Monday and the company decided to keep as much liquidity as possible during the restructuring, he said.
The company requested authority to continue paying wages and honoring employee benefit programs, as well as pay vendors and suppliers, it said in the statement. It intends to “wind-down” operations in Peru “to renew its focus on core markets upon emergence from its court-supervised reorganization.” Peru represents about 5% of operations, the company said.
Its loyalty program, LifeMiles, which is a separate business, was not affected by the filing, the company said in a statement.
Avianca said it remains in discussions with government officials in Colombia and in other countries to provide financial support during the reorganization. Neuhauser said those discussions involve debtor-in-possession financing, which can often last months.
“While these discussions are ongoing, the company intends to utilize its cash on hand, combined with funds generated from its ongoing operations (such as cargo), to support the business during the court-supervised reorganization process,” Van Der Werff said in the statement.
Van der Werff has been in charge only since June 2019, when Avianca’s finances were already shaky. The company is getting financial advice from Seabury Securities LLC and FTI Consulting, with legal help from Milbank LLP, Smith, Gambrell & Russell, LLP, Gómez-Pinzón Abogados and Urdaneta, Vélez, Pearl & Abdallah Abogados.
The case is Avianca Inc., 20-11132, U.S. Bankruptcy Court for the Southern District of New York


fortune--2020-05-12--Say Amazon actually buys AMC Theatres. What would that be like?

IRS says more stimulus checks are ‘ on the way ’ —and explained why yours may not be the amount @ @

A curious thing happened Monday morning: Shares of struggling AMC Theatres leapt by as much as 56%, to $6.41, after a report circulated that Amazon held talks with the movie chain over a potential takeover.
The report’s controversial publisher, the U.K.’s Daily Mail, said it was unclear if the discussions were still active or if they would lead to a deal, citing unnamed sources. (Neither AMC nor Amazon responded to Fortune’s request for comment, though Amazon told others that it does not comment on speculation.) Whatever the report’s veracity, the impact the speculation had on AMC’s stock was very much real, and a fascinating development for the world’s largest movie theater chain given its recent fortunes.
AMC, like all movie theater companies and virtually the entire entertainment industry, has been hit hard by the novel coronavirus pandemic. In mid-April, the Leawood, Kan. company’s stock was down a staggering 70% year to date. AMC also has been the subject of several reports stating that its bankruptcy was not a matter of if, but when. And the company recently engaged in a public row with Universal Pictures after the studio successfully released Trolls World Tour on demand and touted the viability of digital releases even after theaters reopen—a perceived insult to its once-happy partner.
Then came the Amazon report. At a time of struggle and uncertainty, would an AMC takeover by the Jeff Bezos behemoth be so farfetched or unwelcome? After all, Amazon is already in the movie business. Its Amazon Studios unit produces original films and television shows. The e-commerce giant has pulled off a large acquisition before, nabbing upscale grocer Whole Foods for $13.7 billion in 2017. It may serve as an example: After that deal, Amazon linked its Prime membership to perks for the grocer’s brick-and-mortar experience—and vice versa—and began integrating Whole Foods into Amazon’s online shopping platform.
So what might AMC look like under Amazon management? How would one of the world’s largest technology companies improve a century-old theater enterprise? Allow us to speculate:
Ticket prices drop
With billions in Amazon’s war chest and its famed “growth at the cost of profits” approach, Amazon could drop the average price of tickets by a couple of bucks, much as it did to key products—such as fresh produce and dairy—at Whole Foods. The discount would give Amazon-branded theaters an immediate competitive advantage in luring consumers from national competition like Regal and Cinemark. And just like other Whole Foods categories—e.g. bread or snacks—one can imagine concessions seeing a price increase, helping offset the ticketing discount.
Movie memberships become an Amazon Prime perk
AMC’s Stubs A-List program, in which subscribers can see up to three movies a week for a monthly fee (around $20 to $25, depending on region), would make plenty of sense within Amazon Prime, which already offers free two-day shipping, weekly deals at Whole Foods, and of course, access to Amazon’s video streaming library. Nor is it farfetched to imagine Prime members gaining access to discounted tickets at AMC, Odeon, and UCI Cinemas.
Amazon renews its Hollywood talent shopping spree
What’s it mean to be the largest theater chain on Earth? Roughly 1,000 cinemas and 11,000 screens in fifteen countries. With so many venues added to its portfolio, Amazon could conceivably kick off a new mission to recruit Hollywood’s top directors, writers, and actors. The pitch: We are no longer a streaming-first company with an occasional indie hit that plays in theaters for two weeks for Oscar consideration; join us and we’ll play your work each night across the largest network in the world. (And better yet, we’ll prioritize it over everyone else’s work for months—then make it available on Prime Video right after.)
Amazon original movies get a bricks-and-mortar upgrade
With AMC’s extensive theater portfolio on hand, Amazon could decide to exclusively premiere its studio originals—now featuring even better talent!—in its own theaters for a short window, giving audiences a more engaging option than their own living rooms. In this scenario Amazon needn’t carve off a slice of ticket sales to rival theater chains nor be terribly bothered by the long-term trend of streaming movies cutting into theatrical revenues—after all, it would control both parts of the pie.
Sound illegal? Under current legal precedent, it is. A 1948 Supreme Court ruling, United States v. Paramount Pictures, Inc., bars film studios from owning their own theaters in the name of antitrust. Yet in late November, the Justice Department’s antitrust chief, Makan Delrahim, announced his intention to terminate those rules, describing them as no longer needed. If that decision were to come to pass—there would be a two-year sunset period, Delrahim said—Amazon could begin to capitalize on AMC’s footprint in new ways.
More must-read stories from Fortune:
—Rocking out in your car: How Europe is staging live music events in the coronavirus age
—In jazz, acting, and The Eddy, André Holland listens for “the notes you don’t play”
—How the film industry is planning its post-pandemic return
—How CBS legal drama All Rise made its virtual coronavirus episode
—The Last Dance director is racing to finish episodes


fortune--2020-05-11--Reopening the U.S. economy too soon could cause a ‘double-dip’ recession

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When the coronavirus erupted in the United States, it triggered quarantines, travel curbs and business shutdowns. Many economists predicted a V-shaped journey for the economy: A sharp drop, then a quick bounce-back as the virus faded and the economy regained health.
Others envisioned a slower, U-shaped course.
Now, as President Donald Trump and many Republicans press to reopen the economy, some experts see an ominous risk: That a too-hasty relaxation of social distancing could ignite a resurgence of COVID-19 cases by fall, sending the economy back into lockdown. The result: a W-shaped disaster in which a tentative recovery would sink back into a “double-dip” recession before rebounding eventually.
“The push to reopen the economy is making a W-shaped recovery very much more likely,” said Jeffrey Frankel, professor of capital formation and growth at the Harvard Kennedy School.
In Frankel’s view, any widespread reopening should wait for a sustained drop in death rates and the broad availability of tests. No one is completely safe until an effective treatment or vaccine can be produced and widely distributed — a scenario that’s likely many months away.
Frankel said he also worries that the government might prematurely withdraw financial aid to the economy, thereby weakening the pillars of any tentative recovery.
“A W-shaped recovery is a distinct possibility,” said Yongseok Shin, an economist at Washington University in St. Louis and a research fellow at the Federal Reserve Bank of St. Louis. “Unless the reopening is carefully managed with extensive testing and voluntary social distancing, infections will rapidly rise in many localities.
“People will then hunker down for fear of infection, and local governments will re-impose lockdowns, quashing any economic recovery we will have had to that point.’’
A double-dip recession would significantly heighten the risks for an already debilitated U.S. economy. Congress has provided roughly $3 trillion in aid — by far its largest rescue ever — to help households and companies survive the next few months. That short-term aid, though, assumes any recovery will last. If a second downturn were to flare up, it’s far from clear that Congress would be ready to offer trillions more to enable businesses to survive yet another round of months-long shutdowns.
Nor do many companies have the cash reserves to cushion against a second recession. And just as threatening, a double-tip downturn would sap the confidence of individuals and businesses that is essential to an economic bounce-back. If consumers don’t trust that a recovery will last, many won’t resume spending, and the economy would struggle to rebound.
On Monday, plastic spacing barriers and millions of masks appeared on the streets of Europe’s newly reopened cities as France and Belgium emerged from lockdowns, the Netherlands sent children back to school and Spain allowed people to eat outdoors. All faced the delicate balance of restarting battered economies without causing a second wave of coronavirus infections.
In the United States, Federal Reserve Chair Jerome Powell has urged caution in reopening the economy. Powell has warned against taking “too much risk of second and third waves’’ of the virus.
For now, the economy is essentially in free-fall. It shed a record 20.5 million jobs in April. The unemployment rate surged to 14.7%, the highest since the Great Depression. The gross domestic product — the broadest measure of output — shrank at a 4.8% annual rate from January through March and is expected to post an astounding 40% annual collapse in the current quarter. That would be, by far, the worst on record dating to 1947.
Facing a catastrophe in an election year, Trump and many Republican allies are eager to ease restrictions and restart the economy. They say the use of masks and other protections should allow many businesses to safely reopen under certain guidelines. Trump has openly backed protests that are intended to compel governors to “liberate’’ their states from lockdowns.
But The Associated Press reported last week that many U.S. governors are disregarding White House guidelines. Seventeen states didn’t meet a key benchmark set by the White House for beginning to reopen businesses: A 14-day downward trajectory in new cases or positive test rates.
Texas’ Republican lieutenant governor, Dan Patrick, has gone so far as to suggest that restarting the economy might be worth the risk of some additional deaths.
“There are more important things than living,’’ Patrick said in an interview with Fox News. “I don’t want to die, nobody wants to die, but man, we got to take some risks and get back in the game and get this country back up and running.”
Most Americans say they’re wary of trying to return to business as normal now. A Pew Research Center survey found that 68% said they feared that state governments would lift restrictions too soon. Just 31% wanted restrictions lifted sooner.
“The idea that you just turn the spigot back on is just ridiculous,” said Diane Swonk, chief economist at the consulting firm Grant Thornton. ”It’s still a COVID-tainted spigot. No one wants water from a poisoned well.’’
Many businesses are also tempering their optimism. The data firm Womply found that even in Texas and Florida, states that are being especially aggressive about reopening their economies, businesses are moving slowly. Womply found only a “small-to-negligible drop’’ in the share of Texas and Florida businesses that remain closed.
“This could signal that previously closed businesses may have trouble figuring out how to open with new guidelines, attracting patrons, or may be closed indefinitely,” Womply concluded.
At Big Buzz, a health care marketing consultancy in Denver, CEO Wendy Phillips is expecting “more a W-shaped than a V-shaped’’ rebound. Phillips has reduced her staff from eight to six, two of whom kept their full-time jobs only after the government delivered a $105,000 loan under a rescue program for small businesses.
“There’s so much unknown looking forward,’’ Phillips said. “I think it’s going to be a good two or three years, at a minimum, of recession.’’
Frankel at the Harvard Kennedy School and others worry that state and local governments, hemorrhaging tax revenue, will be forced to make growth-stunting cuts just as a recovery might be straining to gain traction.
Another threat is the prospect of bankruptcies and cash shortfalls for companies and households. Some have been able to defer rent and other payments but will eventually have to repay their landlords and other creditors in full.
Likewise, U.S. authorities declared premature victory over the 1918 Spanish flu outbreak, only to see it return, deadlier than before. In the current pandemic, South Korea eased restrictions as cases dropped. But on Saturday, Seoul had to shut down nightclubs, bars and discos after dozens of infections were linked to club goers.
Last week, researchers at the Columbia University Mailman School of Public Health warned that easing stay-at-home orders and allowing people to mingle more freely would mean that “new COVID-19 cases and deaths will rebound in late May.’’
The Columbia researchers predict a resurgence of cases two to four weeks after states begin to reopen.
“The lag between infection acquisition and case confirmation, coupled with insufficient testing and contact tracing, will mask any rebound and exponential growth of COVID-19 until it is well underway,” said the lead researcher, Jeffrey Shaman.


fortune--2020-05-11--When professional sports begin again, coaches say players will need a ramp-up period

Making it safe for America’s professional sports teams to start playing games is one thing.
Making sure athletes are in game shape is another.
The coronavirus pandemic brought sports to a halt, but stay-at-home orders are starting to be eased and a handful of NBA teams are opening practice facilities.
For players, the difference between merely working out and playing games will be a significant jump, and experts say things shouldn’t be rushed. With athletes unable to simulate game or even practice activity at home, they will need time before resuming competition.
“Whatever the amount of time is, just know that players will have the input and say so because we’re the ones that’s playing, and that comes first,” said Oklahoma City Thunder guard Chris Paul, president of the National Basketball Players Association. “We don’t ever want to put guys in a situation where their injury risk is high. It varies from player to player. But it’s at least got to be three to four weeks.”
Charlotte Hornets coach James Borrego said players could be at different points based on their access to equipment.
“There’s veterans out there that may have a court in their home, in their facility and they’re probably a little bit more ready to go than others,” he said. “I think we’re talking weeks. This isn’t something where after one week these guys are ready to go.”
NHL Commissioner Gary Bettman has said on multiple occasions he believes a two- to three-week training camp would be needed before the season resumes. Many hockey teams have had trainers send at-home workout routines to players, but few if any have been on the ice in months.
“As much as I could mentally be in game mode, your body’s not ready for it if you don’t get a full offseason of training and if you don’t get to play a long training camp with like seven exhibition games,” Los Angeles Kings defenseman Drew Doughty said. “If you only get a week training camp with a couple exhibition games, you’re going to ruin your body.”
Edmonton Oilers forward Alex Chiasson said it is on the athlete to be ready.
“That’s going to be on us,” he said. “We’re professional athletes. We’ve got to make sure we prepare. It’s not easy, but it is what it is, and we’ve got to deal with the situation as best as we can.”
While basketball and hockey were nearing their playoffs, baseball was in spring training when sports were shut down. It created a particular wrinkle for pitchers, who tend to train methodically toward full games.
Washington Nationals general manager Mike Rizzo said he expects another period that resembles spring training before games are played.
“The most important part of any spring training is preparation for your pitchers, especially your starting pitchers,” Rizzo said. “Whenever you have to expedite a spring training, that’s probably the most impactful decision that you have to make: how to ramp them up.”
Baltimore Orioles GM Mike Elias agreed.
“When baseball does come back, you have to worry about guys going a very small number of innings,” he said. “I don’t know that we’ve come up with a solution to that. … The public health guidelines makes it tough to do it without a training staff and coaches. Some of the pitchers are throwing into nets in their backyards and hitters are hitting off the tee.”
Tampa Bay catcher Mike Zunino said the pitchers were his biggest concern.
“The biggest worry is injuries,” he said. “It’s one of those things, I think guys are staying in shape, they’re throwing now. Hopefully a few weeks is enough. I think we’ll have to be smart as the season opens to keep guys fresh.”
Dr. Mike Reinold, senior medical adviser for the Chicago White Sox, said the challenge for pitchers has been how to at least maintain what they gained from their previous spring training progression.
“It will take around three weeks to get a starting pitcher likely ramped up to five innings, but that assumes that they have done the work to maintain themselves and are ready to even start that progression,” he said.
Reinold said preparing is complicated because there is no return date set: “They need to know when to peak.”
“That’s a big, important concept when we’re trying to get our athletes ready for a competitive season that they’re building for,” he said. “This is the first time in my career that we’ve ever not had that.”
Pittsburgh Pirates manager Derek Shelton said assessing each player’s condition after the layoff will be a key part of getting things rolling again. He said those conversations are happening even now.
“We don’t need a soft-tissue (injury) because guys were a little bit behind,” he said. “That’s why the openness of the player and the conversations we’re having now are so important so we have a baseline coming in.”
Milwaukee Brewers general manager David Stearns said a second preseason probably wouldn’t need to be too long once it’s deemed safe.
“Once it’s safe, we can turn this thing on pretty quickly,” he said.
Elias agreed: “We will be ready, and baseball will be ready for America when America is ready for us.”


fortune--2020-05-11--Elon Musk: Tesla will defy law to reopen car plant

Elon Musk said Tesla is flouting the California county that has blocked its efforts to reopen its only U.S. car plant by restarting production at the facility.
“I will be on the line with everyone else,” the chief executive officer said in a tweet Monday. “If anyone is arrested, I ask that it only be me.”
Tesla told production workers earlier it was getting back to work at its factory in Fremont, Calif., after a high-pitched battle with local officials who blocked the plant from reopening last week. Valerie Capers Workman, Tesla’s head of North American human resources, said in an email to production workers that their furlough ended Sunday and that managers will contact them within 24 hours with their start date and schedule.
The email conflicted with remarks California Governor Gavin Newsom made during his daily press briefing Monday. He said he expected the company’s plant would be able to reopen as early as next week.
“My understanding is they have had some very constructive conversations,” Newsom said, referring to Tesla and Alameda County, where Fremont is located. “My belief and hope and expectation is as early as next week, they will be able to resume.”
Tesla sued the county over the weekend after it told the company it didn’t meet criteria to reopen. Newsom, who allowed manufacturing in parts of the state to restart May 8, said Monday that the county decided to enforce stricter rules around reopening.
When asked about Tesla reopening its Fremont plant regardless of Alameda’s order, Newsom said he was unaware.
“It was my understanding when I walked up to the podium today that that wasn’t the case,” he said.
Alameda’s public health department declined to comment.
Musk, 48, tweeted over the weekend that Alameda’s refusal to let Tesla reopen the Fremont factory was “the final straw” and that he’d immediately move Tesla’s headquarters to Nevada or Texas.
Newsom said Monday the state has a strong relationship with Tesla, calling it “a company that this state has substantively supported for now many, many years.” Musk then thanked the governor in a tweet.
More must-read tech coverage from Fortune:
—Remote work, online grocery shopping, cord cutting: What coronavirus trends will stick
—Salesforce CEO Marc Benioff describes what office life will be like after COVID-19
—Uber’s food delivery helps cushion the blow of COVID-19 on rides business
—IBM thinks tech tested by astronauts could help us take care of isolated loved ones
—WATCH: Zoom’s ups and downs since the coronavirus crisis


fortune--2020-05-11--IRS says more stimulus checks are ‘on the way’—and explained why yours may not be the amount you exp

IRS says more stimulus checks are ‘on the way’—and explained why yours may not be the amount you expected

Say Amazon actually buys AMC Theatres .
What would that be like ?

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That’s a lot of checks.
The IRS announced Monday that it had sent out 130 million stimulus checks and promised that “more are on the way.” Anyone who is still waiting for their check can do a status check at the Get My Payment portal (some users who originally were unable to track their payments had luck with this tip.)
However, in a lengthy release on the agency’s website, the IRS spelled out several reasons why people might have been expecting one number on their check, but ended up with a different amount in their bank account.
What if my stimulus check is for the wrong amount?
The biggest reason is that the IRS was working from old information. That may have happened because either you haven’t filed your 2019 return yet, or you did file but it was not yet processed when the IRS calculated your stimulus payment (in which case the agency would default to using information from your 2018 return).
In that case, changes (such as higher or lower income, or the birth or adoption of a child) would not have been captured. The agency explains: “In many cases, however, these taxpayers may be able to claim an additional amount on the 2020 tax return they file next year. This could include up to an additional $500 for each qualifying child not reflected in their Economic Impact Payment.”
Why didn’t I receive the $500 child credit?
Another reason the amount you received may be different from what you were expecting could be a discrepancy in whether your claimed dependent was in fact eligible for the $500 child credit. To claim the credit, the taxpayer must be related to the child, live with them for more than half the year, and provide at least half their support.
Another note: “Parents who are not married to each other and do not file a joint return cannot both claim their qualifying child as a dependent.” Also, college students generally do not qualify for the additional $500 credit.
Why was my stimulus check reduced?
Another reason your check could be lower than expected? The IRS clarified that past-due child support may have been deducted from a payment, as well as garnishments by creditors.
What can I do if my stimulus check amount is wrong?
The agency recommends everyone keep the copy of the letter they receive from the IRS (sent after the payment arrives). “In many instances, eligible taxpayers who received a smaller-than-expected Economic Impact Payment (EIP) may qualify to receive an additional amount early next year when they file their 2020 federal income tax return,” according to the agency.


fortune--2020-05-11--New York begins a new chapter with some reopenings on Friday

New York starts a fresh phase of recovery as some regions are ready to start reopening on Friday, Governor Andrew Cuomo said.
Businesses including construction, curbside retail, drive-in movies and some recreational activities will reopen this week on a regional basis, with each area having met seven criteria, including low rates of virus-related hospitalizations and certain testing and tracing measures in place. There will be control rooms to monitor each area’s reopening, ensuring they meet the metrics, the governor said.
“As fast as you can reopen, reopen,” Cuomo said Monday at a press briefing. “Just watch the dials.”
Cuomo said the Finger Lakes, Southern Tier and Mohawk Valley have met the criteria, while other regions including the North Country and central New York are close to meeting them. The state today will launch a dashboard showing where each regions stands in meeting the reopening criteria.
The governor has said it would be a “miracle” if hard-hit New York City were ready to reopen on May 15. Earlier today, Mayor Bill de Blasio said the city’s lockdown is likely to continue into June.
Citywide hospital admissions have declined, along with intensive-care admissions, but measures of virus incidence show the city is “clearly not ready yet” to reopen, de Blasio said.
Statewide, New York added 1,660 cases on Sunday, the smallest number since mid-March. The number of new Covid hospitalizations is 488, about the same as it was on March 19, when the outbreak started to rapidly increase. New York reported 161 additional deaths, the lowest since late March. For more than a week, that number stalled between 200 and 300.
“We’re coming out of the other side,” Cuomo said. “In many ways, from my point of view, we’re on the other side of the mountain.”
New York is the epicenter of the U.S. outbreak, with 337,055 cases and 21,643 deaths. Cuomo said it’s important to learn from the mistakes that others have made. Other countries reopened too fast and didn’t have have proper controls in place, he said.


fortune--2020-05-11--Disney CEO Bob Chapek: Shanghai Disneyland tickets ‘essentially’ sold out for week

On Monday, the day that China’s Shanghai Disneyland resort reopened to the public with strict social distancing measures, Disney CEO Bob Chapek said tickets for the theme park are “essentially” sold out for the rest of the week.
“We have a few tickets available on certain days, but essentially everything’s gone,” Chapek said during an interview on CNBC’s Squawk Alley. “This is really indicative of the love that consumers have for our brand across the world.”
Chapek’s comments come with a caveat: The Chinese government has restricted Shanghai Disneyland’s attendance at 30% capacity, or around 24,000 guests. According to report on the ground from CNN, the actual attendance was well below the 30% maximum, saying Disney cast members “far outnumbered the guests.”
“We’re very encouraged by what we see in Shanghai.” Disney CEO Bob Chapek says the company will be “very conservative” as it reopens its theme parks. https://t.co/OPGAPam4Gh pic.twitter.com/sFydyCzQhX — CNBC (@CNBC) May 11, 2020
“This is a first step, it’s a baby step, and we’re moving slowly, but we’re very encouraged by what we see in Shanghai,” Chapek said. The chief executive added that the plan was to increase attendance by 5,000 guests a week, “just until we get to the point that we know that we can operate under our guidelines in a way that’s very responsible.” Disney would look to implement a similar gradual strategy once the 30% cap is lifted.
Chapek would not comment on timelines for reopening Disney parks in Hong Kong or Tokyo, as well as Disneyland and Disney World in the U.S. Disney Springs, the outdoor mall just outside of Orlando’s Disney World, will reopen in phases starting May 20. The Shanghai park’s version of that shopping complex, Disneytown, resumed operations in early March.
“I think it is a good sign that Disney Springs is going to open up in Orlando,” Chapek said. “We stuck our toe in the water, if you will, in Shanghai with Disneytown, and we operated that for about a month, and everything went extremely well. Hopefully we’ll see that at Disney Springs as well.”
More must-read stories from Fortune:
—Rocking out in your car: How Europe is staging live music events in the coronavirus age
—In jazz, acting, and The Eddy, André Holland listens for “the notes you don’t play”
—How the film industry is planning its post-pandemic return
—How CBS legal drama All Rise made its virtual coronavirus episode
—The Last Dance director is racing to finish episodes


fortune--2020-05-11--Welcome to Britain’s confusing plan to ease its lockdown

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The U.K. government was already under fire for having the highest death toll in Europe, a lackluster testing regime, a shortage of protective equipment for frontline medical staff, and its decision to build a tracing app—from scratch.
Add to those waves of criticism yet another: an outcry from opposition politicians and scientists alike over Boris Johnson’s communications strategy—from leaking strategy decisions to the press before informing the leader of Scotland, to swapping the national directive from “stay home” to “stay alert.”
“I don’t know what ‘stay alert’ means,” said Nicola Sturgeon, the leader of the Scottish National Party.
Sturgeon said in a tweet on Sunday that she had learned of the new catchphrase, which is being rolled out in conjunction with the start of Johnson’s loosening of the lockdown, from the newspapers. She again counseled the 5.4 million Scots to ignore Johnson’s instructions and “stay home,” in keeping with the government’s previous standing order.
On Sunday, Boris Johnson delivered a short televised address to the nation laying out a tentative roadmap for the U.K. to return to normality, weeks after most European nations laid out guidelines for how schools, businesses and public places would reopen. But the strategy was quickly dubbed vague and confusing—with multiple government ministers contradicting Johnson’s statement, only to have to quickly backpedal.
Communities secretary Robert Jenrick attempted to explain “stay alert,” telling Sky News that it means “we want now to have a message which encourages people to go to work,” but he later told the BBC the government wants “people to stay at home as much as possible.”
The statement came after the U.K. hit a grim milestone last week. Its official death toll topped 30,000, surpassing Italy as the country with the most deaths in Europe. The death toll as well as the number of new infections in Germany, Italy and other major European countries had dropped significantly before reopening measures began there in the previous weeks.
“It looks like the PM is trying to implement the ‘have cake and eat it’ maxim he popularised in a previous life,” said Trish Greenlagh, professor of primary care health services at the University of Oxford, referencing a famous Johsonism from his days leading the 2016 campaign to take Britain out of the European Union.
“On the one hand, he says he’s not lifting the lockdown because he is determined to avoid a second peak. On the other hand, he appears very keen to lift the lockdown because he urgently needs to fix the economy.” Greenlagh said Johnson’s approach “could give us the worst of both worlds.”
Other scientists noted that the approach was cautious, but called the details and the government’s delivery “wooly” and “contradictory,” and remarked that the testing and monitoring systems necessary to keep infections down as lockdowns ease were not in place.
“It feels as though the ethos that advice from the scientific community should guide policy has been abandoned,” said Stephen Griffin, an associate professor in the School of Medicine at the University of Leeds. He said the U.K. had “achieved a plateau in new cases, not a significant drop,” meaning the government was easing the lockdown despite not meeting one of its own publicly proclaimed “Five Pillars,” or requirements, for doing so.
Some non-expert, public figures were more succinct. Following the statement, Nigella Lawson, the British food writer and television personality, simply tweeted an emoji of a woman slapping her own forehead.
The public seems to be only slightly more supportive of the latest messaging. A snap survey conducted by the polling firm YouGov found narrow support for the Prime Minister’s changes, with 44% supporting the new policy and 43% opposed. Sentiments largely broke along political and generational lines: almost two-thirds of Conservative Party members as well as a majority of those who had been in favor of the U.K.’s decision to leave the EU—even the virus isn’t strong enough to vanquish Brexit sentiment— supported the Prime Minister.
Meanwhile, the majority of Labour Party members and those who had opposed Brexit, also opposed the Prime Minister’s new policy. Support for Johnson’s changes were highest among Britons over the age of 65, with 53% favoring his new policy, a figure that fell to less than 40% among those under the age of 50.
Sunbathing, factories, and seeing one parent—or two? In the address, Johnson said that people could now linger in parks and sunbathe, alone or with members of their own households, and workers who cannot work from home should go back to work, mentioning manufacturing and construction. He also mentioned potential timelines for reopening schools after June 1. Businesses, including the hospitality sector would be able to reopen “at the earliest by July.”
More details announced on Monday included recommended face masks in confined spaces, and that some roads will be turned over to cyclists to help ease the burden on transit.
Johnson also introduced a new five-tiered “Covid Alert Level” system, tied to the rate of transmission, or R, of the virus. Level 1 is when the disease is not present in the U.K. and Level 5 is when the epidemic is so rampant that the National Health Service is unable to cope. He said that the country had been at Level 4 and was now lowering the alert status to Level 3.
In a further blow to the already battered airline sector, he also said he was “serving notice that it will soon be the time” to impose a mandatory two-week quarantine on all people arriving in the U.K. by air, though the government said travel from Ireland and France, which is connected to the U.K. by rail through the English Channel, would be permitted. It was not clear if travel from other countries through Ireland or France would be allowed.
However, because of disagreement from Scotland, Wales and Northern Ireland with the approach to easing U.K.-wide lockdowns, Johnson’s guidelines appear to only apply in reality to England. And conflicting statements about further easing measures expected from Wednesday, including the ability to meet other people in parks, turned into a confusing debate on Sunday between government sources over whether it was possible to meet both of your parents—according to foreign secretary Dominic Raab—or only one, according to a government source, quoted in the Independent, who said Raab had been mistaken. More details are expected to be released later on Monday when Johnson speaks to Parliament. Lagging testing, defective PPE, and a new tracing app The confusion only adds to the pressure the government was facing for failing to secure enough personal protective equipment for healthcare workers and care home staff and for lagging behind the rest of Europe on testing capacity.
It has also been criticized for a haphazard approach to harnessing Britain’s private sector infrastructure for the coronavirus fight, with some companies creating ventilators that wound up being unnecessary or not of the right type. For months, it failed to enlist drug companies and university research labs to help expand testing capacity.
Frequently, the press has caught the government going to extraordinary lengths to create the illusion of progress. In the case of PPE, the government inflated the amount of equipment it was shipping to frontline staff by counting each individual glove as a separate item of equipment and including trash bags and paper toweling in the count.
In one fiasco, the government dispatched a Royal Air Force transport plane to Turkey to pick up 400,000 medical gowns, but having landed, the plane was unable to pick up the gear for several days due to export license issues. Then, when the plane did fly back with the equipment, inspectors found it was defective and could not be used any way.
In the case of testing, the health minister set a goal of testing 100,000 people a day by the end of April. To meet this target, the government counted home test kits that had been mailed to people, but not yet returned to be analyzed by a lab. It also reportedly asked hospitals to test all of their patients, even if they were not suspected to have coronavirus.
While this enabled the government to say it exceeded its goal on April 30, when it said it tested 122,000 people, the number of people tested has been below that level every day since. Over the weekend it emerged the government had been forced to send 50,000 tests to the U.S. for analysis due to a problem with its own labs.
The government looks likely to face another debacle over plans to deploy its own contact tracing mobile phone app, rather than build an app based on a protocol offered by Apple and Google. The government’s own app has been criticized for both being technically inferior and raising privacy concerns. To work, users need to keep the app open on their phones, which quickly depletes the phone battery. The app also sends location and Bluetooth proximity information to a central government database. The government says it wants this information to be able to conduct research into the pandemic, but civil liberties groups worry that having obtained this data, the government may be tempted to use it for other surveillance or law enforcement purposes. The Apple-Google app works in a completely decentralized way, with no information stored centrally.
Several other European governments toyed with building their own apps too, only to abandon the effort in favor of the Apple-Google protocol. Rather than follow this example, however, the U.K. has begun testing its own app on an island off England’s south coast while at the same time hiring a consulting firm to look into the prospect of abandoning the project and adopting the Apple-Google solution after all. Our mission to help you navigate the new normal is fueled by subscribers. To enjoy unlimited access to our journalism, subscribe today. More must-read international coverage from Fortune: —Inside China’s reopening: 7 personal stories of life after lockdown
—Photo essay: What life looks like in Europe as the continent starts to reopen
—Reopening of Shanghai Disneyland is a proving ground for pandemic-era theme parks
—Trump’s demand that China pay coronavirus reparations evokes an ugly history
—PODCAST: How Marc Benioff is helping out during the coronavirus pandemic
—WATCH: The global crisis in recycling
Subscribe to How To Reopen, Fortune’s weekly newsletter on what it takes to reboot business in the midst of a pandemic


fortune--2020-05-11--Sen. Ted Cruz writing book on Supreme Court cases

Sen. Ted Cruz is working on a book, to be published in October, about the Supreme Court.
Regnery Publishing announced Monday that the book was called “One Vote Away” and would draw upon the Texas Republican’s long legal background to provide an inside look at key court decisions.
“With the perspective only a veteran government leader and seasoned Supreme Court advocate can bring, Cruz will outline these crucial Court battles as a powerful wakeup call to Americans to the exceptional power of a single Supreme Court vote against the backdrop of the 2020 election and in the decades to come,” according to a statement from Regnery, a conservative publisher.
Cruz previously wrote the memoir “A Time for Truth.”
Before first being elected to the U.S. Senate, in 2012, Cruz served as Texas solicitor general from 2003-2008 and also spent several years in private practice. Notable cases he argued before the Supreme Court included Medellin v. Texas, in which he differed with then-President George W. Bush, a fellow Texas Republican. Cruz contended that Bush overreached in supporting the claim of Jose Medellin, a Mexican national convicted and sentenced to death in Texas for his part in the rape and murder of two teenage girls, that his rights had been violated under international law, the Vienna Convention.
In 2008, the court ruled 6-3 in favor of Texas.
More must-read stories from Fortune:
—Real unemployment rate soars past 24.9%—and the U.S. has now lost 33.5 million jobs
—Inside China’s reopening: 7 personal stories of life after lockdown
—Sheryl Sandberg: The pandemic is creating a “double double shift” for women
—Trump’s demand that China pay coronavirus reparations evokes an ugly history
—Now is the time to invest in preschool education. Here’s why
—PODCAST: How Marc Benioff is helping out during the coronavirus pandemic
—WATCH: Why the banks were ready for the financial impact of coronavirus
Subscribe to How To Reopen, Fortune’s weekly newsletter on what it takes to reboot business in the midst of a pandemic


fortune--2020-05-11--AMC Entertainment shares soar on report of possible Amazon takeover

AMC Entertainment Holdings Inc. jumped as much as 56% on a media report that Amazon.com Inc. has discussed a potential takeover of the largest U.S. movie-theater owner.
It’s unclear if the talks are active or will lead to a deal, the U.K.’s Mail on Sunday newspaper said, citing unidentified sources. AMC and Amazon didn’t immediately respond to requests for comment Monday.
AMC shares rose as much as $2.31 to $6.41 in premarket trading, and were up 41% to $5.76 at 9:37 a.m. in New York. The stock was down 43% this year through Friday, battered along with the rest of the cinema industry by a worldwide shutdown for the coronavirus pandemic.
The reported talks are unlikely to spark a price war for AMC, Bloomberg Intelligence media analyst Amine Bensaid said in a note. “Movie-going is unlikely to fully bounce back in a post-Covid-19 world and may create risks for an acquirer,” he said. “AMC’s elevated debt load and unavoidable fixed costs means the company’s near-term financial flexibility will be severely challenged.”
AMC showed its concern about existential threats with its reaction to last month’s straight-to-streaming release of the kids movie “Trolls World Tour,” which Comcast Corp.’s Universal Pictures crowed about as a high-grossing success. AMC said it would no longer show Universal’s movies.
Along with its vast retail and web-services operations, Amazon is an active player in streaming with its Prime Video platform, along with releasing original films. Like Netflix Inc., Amazon is eager to shore up its burgeoning position in Hollywood as new and old players scrap for content deals. Buying a theater chain would guarantee another outlet for its movies.
Our mission to help you navigate the new normal is fueled by subscribers. To enjoy unlimited access to our journalism, subscribe today.
More must-read stories from Fortune:
—Rocking out in your car: How Europe is staging live music events in the coronavirus age
—In jazz, acting, and The Eddy, André Holland listens for “the notes you don’t play”
—How the film industry is planning its post-pandemic return
—How CBS legal drama All Rise made its virtual coronavirus episode
—The Last Dance director is racing to finish episodes


fortune--2020-05-11--Do U.S. markets still have an appetite for Chinese IPOs?

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Chinese IPOs in the U.S. still live—at least for some companies.
Chinese cloud-computing firm Kingsoft Cloud closed 40% up in its first day of trading Friday, after raising some $510 million via IPO.
It’s the first IPO of a Chinese company since the blowup of Starbucks competitor Luckin Coffee, which revealed in April that it had fabricated much of its sales in 2019 and suspended its chief operating officer. Roughly two years old, Luckin has raised over $1.5 billion from investors over the past year.
Kingsoft’s IPO is being posed as an example of continued U.S. appetite for Chinese IPOs despite distrust sowed by Luckin—but there’s more nuance here that puts Kingsoft in a different bucket.
For starters, the cloud company is a Saas business, among the echelon of companies expected to do well amid the coronavirus if not boom. Kingsoft also has a proven entrepreneur at its back— CEO of smartphone maker Xiaomi, Lei Jun, who is chairman at Kingsoft and owns a 14% stake in the company (The relationship extends even beyond that, with Xiaomi making up 14.4% of Kingsoft’s revenue in 2019).
Other Chinese IPOs will find demand like Kingsoft, but such companies will generally endure heavier scrutiny amid Sino-U.S. tensions that have only worsened over the coronavirus. Days before Kingsoft’s offering, Sen. Marco Rubio (R.-Fla.) tweeted: “Didn’t last month’s Luckin Coffee scandal show us why no new listings from #China should be allowed until US regulators can inspect the books of all firms who wish to be traded on our exchanges?” Kingsoft investors have so far disagreed with that assessment—but not all will be so lucky.
One more U.S.-listing Chinese company that is barely limping along: Ebang, a major maker of bitcoin mining equipment that previously sought to go public on the Hong Kong Stock Exchange in 2018, filed to raise $100 million recently in the U.S. but posted a precipitous 66% drop in revenues from a year earlier to $109 million in 2019.
The great Tesla debate: The electric car maker is at the center of the greatly politicized and geographically fractured debate over when and how to reopen the country.
A known critic of lockdown orders, Tesla CEO Elon Musk filed a lawsuit against Alameda County, where its main factory is based, over when it could reopen the plant. He also threatened to leave California.
Over the weekend, Republican lawmakers in certain states jumped on the threats, with those in Georgia and Utah (both partially reopening) inviting his business while a Democrat assemblywoman in California (still in lockdown mode) had other choice words for the CEO.
Large Silicon Valley giants are setting their own deadlines—usually further out—for reopening. Google and Facebook, for instance, have told employees that they can work from home until the end of the year. But Tesla’s business requires physical goods to ship for the company to work, a lesser issue for the likes of a search engine or social media company. For the same reason, though, Tesla may find it harder to move its equipment-heavy operations out of state.
It’s a new debate: Will companies move to other states with lower corporate tax thresholds and laxer stay-at-home policies amid the coronavirus?
For an easier read: With surge in bankruptcies and breakups amid the market dislocation, we have added a new segment below around bankruptcies and broken deals.
Lucinda Shen
Twitter: @shenlucinda
Email: lucinda.shen@fortune.com
VENTURE DEALS
- Carta, a Palo Alto-based capitalization management platform, raised $180 million in funding, valuing the company at $3.1 billion. Lightspeed Ventures and Tribe Capital co-led the round.
- Carbon Health, a healthcare provider, raised $28 million in an extended Series B. DCVC was the investor.
- Ai-Media, a Sydney, Australia, based live and recorded captioning, transcription and translation services, raised A$10.3 million (US$6.6 million) from investors including CVC Emerging Companies Fund and Anzu Partners. Ai-Media also acquired Alternative Communications Services (ACS), a U.S.-based captioning service.
- Lucid Lane, a Los Altos, Calif.-based platform to patients on opioids and antidepressants, raised $4 million in seed funding. Battery Ventures and AME Cloud Ventures were the investors. Read more.
- BurnAlong, a Pikesville-based video health and wellness platform, raised $4 million in funding. Unnamed existing investors led the round, and were joined by investors including DM Wellness and CR2 Ventures.
- Spiceology, a Spokane, Wash-based spice company, raised $2 million in funding. Cowles Company led the round and was joined by investors including Kickstart Funds.
PRIVATE EQUITY
- Bain Capital is acquiring a 44% stake in Nichii Gakkan (TYO: 9790), a Japanese nursing home operator, for $1 billion, per the Financial Times citing sources. Read more. The deal would take the company private.
- Bain Capital completed an $817 million deal to acquire Showa Aircraft Industry, a Japanese manufacturing company. The deal takes Showa private. Read more.
- CenterOak Partners acquired Temple Associates, a Sacramento, Calif.-based distributor of loose abrasives and blast equipment. The firm also formed SurfacePrep, a Grand Rapids, Mich-based distributor of abrasives and specialty ceramics, by combining Temple with GNAP and 10 strategic acquisitions. Financial terms weren't disclosed.
- Quirch Foods, backed by Palladium Equity Partners, acquired Butts Foods, a Jackson, Tenn.-based protein distributor with five facilities in Tennessee, Alabama and Mississippi. Financial terms weren't disclosed.
IPOS
- Vroom, an online used car seller, filed confidentially for an initial public offering it hopes to stage in June, per the Wall Street Journal citing sources. Read more.
OTHERS
- The Saudi Wealth Fund is weighing an investment in Reliance Jio, India’s telecom giant. Read more.
- Shandong Gold Mining agreed to acquire TMAC Resources (TSX:TMR), a Toronto-based gold mining operation, for around C$230 million ($164.89 million). Read more.
- The Charles Schwab Corp. will acquire the technology and intellectual property of Motif, a San Mateo, Calif.-based maker of thematic portfolios, for cash. Read more.
- York Telecom Corporation acquired Video Corporation of America, a Somerset, N.J.-based maker of audio visual communications solutions and support services, via a Chapter 11 process. Financial terms weren't disclosed.
BANKRUPTCIES AND BREAKUPS
- Carlyle Group and GIC are backing away from a deal to take a 20% stake in American Express Global Business Travel, which offer travel-booking services to mid to large-sized businesses. Read more.
- Avianca Holdings, Latin America’s second-largest airline, filed for bankruptcy. Read more.
- Stage Stores (NYSE:SSI), a discount retailer, has filed for files for Chapter 11 bankruptcy protection.
EXITS
- Apttus, backed by Thoma Bravo, agreed to buy Conga, a maker of document generation applications, for $715 million per Bloomberg. Insight Partners will retain a stake in the company. Read more.
F+FS
- Thoma Bravo is seeking $3 billion for its third middle market fund, per the Wall Street Journal citing sources. Read more.
- Summit Partners aims to raise $963 million for its fifth venture fund. Read more.


fortune--2020-05-11--Working from home during coronavirus is going so well that this Fortune 100 company is going to keep

Working from home during coronavirus is going so well that this Fortune 100 company is going to keep doing it—permanently

Most CEOs are anxiously counting the days until the coronavirus pandemic recedes, and employees can get back to the office. But Nationwide’s CEO Kirt Walker has a slightly different take on working from home: It’s working.
The company’s pandemic experiment has gone so well that they’ve decided to make the arrangement permanent for many of the company’s employees.
The shift took place fast—in early March, the privately held insurer (#75 on the 2019 Fortune 500) moved 98%+ of its 27,000 employees to working from home over five business days. “The first thing we wanted to do was keep our associates safe, stay connected to our members, and do our part for America to flatten the curve,” says Walker.
But overall, once the tech issues were ironed out, there was a surprising finding: “We’ve tracked all of our key performance indicators, and there has been no change,” says Walker, who joined as CEO in 2019. “We keep hearing from members, ‘if you hadn’t announced you were all working from home, we never would have known.'”
So Nationwide plans to shrink from 20 physical offices pre-crisis, to just four. Walker says he’s splitting his own time between Nationwide’s headquarters in Columbus, OH, and his home. He talked to Fortune by phone about what’s driving this change, the future of work, and why Nationwide ends every day with a light show at its headquarters.
This conversation has been edited for length and clarity.
Were you prepared for this pandemic?
We’re an insurance company. Our focus is to manage risk. We’ve planned for a crisis for years. You cross out ‘gas leak’ and insert ‘COVID,’ but we knew for a long time we needed to be able to lift people out of the office and continue serving our members.
Did Nationwide previously have a robust WFH culture?
Pre-COVID, we had about 5,200 associates working from home already. And we’ve done a lot of sharing best practices, including one associate from Arizona who put together a manual that has been widely passed around. One of my favorite tips is that when you work from home, when you start your work day put your photo badge on, and when you end your work day take it off. Psychologically it allows you to start and end—and also lets your family know whether you are ‘at work’ or not.
Additionally, we had been working on a program called “The Future of Work” to explore transitioning more employees to working from home, it’s something we hear especially from millennials that they want. So that was already in the works when COVID showed up.
Did you hit any roadblocks in those early weeks?
We decided early on that we were not going to let the perfect be the enemy of the good. It would take way too long. We just said ‘we are going to make camp on the trail.’ So one thing that came up is that for some associates, the headsets with microphones attached that worked with some systems in office didn’t work when people got home, so we had to scurry to get new ones delivered. And some associates didn’t have adequate home internet, so our tech teams got involved to work with providers.
Why did you decide to make this change permanent?
At the end of the day, we looked at key historical events that shaped society: the Great Depression, the 1918 pandemics, WWI and WWII, 9/11, and the financial crisis. During these crises people reduced consumption, grew more frugal. After the crisis, worry continued and it was a permanent mindset shift. That’s really important. We think the world is changing. We’ve got to take cost out of the system. We want to enable sustainable growth.
How much money will this save Nationwide?
We are a private company, so we’ve decided not to share the numbers. But it will be substantial. The company and our members will benefit.
Talk a little bit about who is going to go back to those four remaining offices?
Candidly, there were those employees that were anxious about returning to work. So we decided to rely on volunteers to staff the first wave. About 25% of our workforce said ‘I want to come back.’ We won’t ask or force those that don’t want to. We believe we’ll end up in a hybrid model: Employees will have access to a ‘hotel’ in the office were they can come in and collaborate, maybe a day or two a week, then other days they’ll work from home.
Some bosses get extremely nervous when they can’t physically see their employees. How do you avoid that?
We hire for attitude. We have built a culture where we can trust associates. And they are using the same technology now that they had in the office. We rely on 10 key performance indicators, and employees can monitor their own work day to day, and so can their supervisors. We don’t try to hold people accountable with amount of time they’re putting in, but rather how well they are doing on those indicators.
How has your overall business changed during coronavirus?
Applications have decreased as people have hunkered down. But we have also seen a decrease in the number of claims. We heard from a lot of members saying ‘I’m having a really tough time financially.’ So we decided to send rebates of $50 to all personal policy holders. The feedback we got was, ‘I was really needing a couple of bucks.’
As we look ahead though, we are thinking about all these patterns that develop during a crisis and how behavior will change. We think that in many lines of insurance people will be looking toward value-based products, while on the financial side of the house people will look more towards guarantees. Especially millennials may be thinking, they aren’t sure about betting on equities or relying on an employer. They need to provide for their own retirement.
Are YOU going to be working from home? How does your family feel about this?
I bounce between the two. There were days that I forced myself to work from home. I wanted to empathize with my associates about what working from home was really like. I have an empty nest now, but my wife and I go over our schedules every day together. You have to communicate. One thing I love to see is that for weeks now, at our main headquarters building in Columbus, every night we light up the office windows to spell out “Stay Safe.” It’s a sign to everyone that we’ll get through this together.
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More must-read finance coverage from Fortune:
—Saving lives vs. saving the economy is a false tradeoff, economists say
—ExxonMobil’s CEO is banking on a return to normal, but most others aren’t so sure
—Cybercriminals adapt to coronavirus faster than the A.I. cops hunting them
—How cannabis purveyors are coping during the pandemic
—Inside the chaotic rollout of the SBA’s PPP loan plan
—Listen to Leadership Next, a Fortune podcast examining the evolving role of CEO
—WATCH: Why the banks were ready for the financial impact of coronavirus
Subscribe to How To Reopen, Fortune’s weekly newsletter on what it takes to reboot business in the midst of a pandemic