WeWork Reportedly to File for Bankruptcy This Month
The coworking company just said it would withhold interest payment on some of its notes.
WeWork is planning to file for bankruptcy as early as next week, sources have told the Wall Street Journal. Earlier Bloomberg also reported the company would file for bankruptcy in November.
WeWork declined to comment to the WSJ on what a spokesperson called “speculation.”
The only public announcement from the company came in the form of a securities filing in which it said it would withhold interest payment of about $6.4 million on some of its notes even though it has the cash to make the payment. It now has a 30-day grace period. The company also said it entered into an agreement with creditors for temporary postponement of payments for some of its other notes. “The forbearance agreement provides time to continue in the positive conversations with our key financial stakeholders and engage with them to implement our ongoing strategic efforts to enhance our capital structure,” the WeWork spokesperson told the WSJ.
WeWork itself has flirted publicly with the question of its solvency, announcing in August that it might need to file for bankruptcy. At the time, CEO David Tolley said that it plans to negotiate heavily with landlords to get lease concessions.
Tolley informed its landlords that its current lease liabilities – which were over two-thirds of total operating expenses in the second quarter – are too high and “dramatically out of step with current market conditions.
“We are taking immediate action to permanently fix our inflexible and high-cost lease portfolio to achieve the sustainable operating model that we need to serve our members for many years to come.”
That means “a process of global engagement with our landlords to renegotiate nearly all our leases,” he wrote.
The negotiating process was likely distasteful for office landlords, many of which are already struggling with high vacancy rates. But a bankruptcy gives WeWork the ability to reject undesirable leases and to walk away from any resulting damages claim. The rejected leases then turn into unsecured debt, meaning the landlords would line up behind bondholders and any other secured creditors.