WeWork Finishes Its Global Restructuring and Exits Bankruptcy
It exited 47.2% of locations and reduced future rent expenses by more than 50%.
WeWork has officially exited bankruptcy. Much of the latest attention has been on leadership change, with former CEO David Tolley stepping down, John Santora, formerly of Cushman & Wakefield, taking the position, and a new board of directors including four out of seven board positions held by people from Yardi Systems.
That isn’t surprising given Yardi was heavily involved in recapitalizing the company, providing $337 million of the new financing, and owns a “majority” of WeWork under the court-accepted plan. SoftBank takes 16.5% of the company, a share that could rise to as much as 36%, depending on how some other credit mechanisms are equitized.
But none of this would be possible without other significant expenses being borne by creditors and the landlords who had to negotiate new positions with WeWork.
A lawyer for WeWork, Steven Serajeddini, had said that the company reached settlements with two groups of junior creditors that previously opposed the restructuring proposal. They included a court-appointed creditors committee and a set of bondholders that included Antara Capital. WeWork agreed to pay $32.5 million to the junior creditors and $8.5 million to the bondholders.
The company announced on June 11, 2024, that it had “right-sized its real estate portfolio, successfully renegotiating over 190 leases and exiting over 170 unprofitable locations, reducing annual rent and tenancy expenses by over $800 million and total future rent expenses by more than $12 billion or over 50%.”
“The Company also equitized $4 billion of prepetition indebtedness and secured $400 million of new equity capital to support operating investments and future strategic growth,” WeWork wrote. It also cut SG&A expenses by more than 30% “while simultaneously reinvesting in core products, services, and real estate.”
Before the November Chapter 11 filing, WeWork had 770 locations across 39 countries, according to the Associated Press. After exiting bankruptcy, its portfolio included 600 wholly owned, franchisee, and joint-venture locations in 37 countries.
“They rejected a great deal (of leases), so it’s obviously going to put WeWork in a much better position in terms of being lean enough … to exit bankruptcy and operate without so much crushing overhead,” John Giampolo, a member partner at New York-based law firm Rosenberg & Estis who specializes in corporate bankruptcy reorganization and represented several landlords and creditors in WeWork’s bankruptcy case, told AP.