Ethan M Steinberg and Amelia Pollard (Bloomberg) — WeWork Inc. filed for bankruptcy, capping a tumultuous period that saw the once high-flying startup navigate a failed initial public offering, Covid-19 lockdowns, a blank-check merger and slow return-to-office trends. The company — which at its 2019 peak commanded a $47 billion valuation — listed $19 billion of liabilities and $15 billion of assets in its bankruptcy petition in New Jersey on Monday.
The Chapter 11 filing allows WeWork to continue operating while working out creditor repayment terms. WeWork entered bankruptcy after reaching a tentative restructuring deal with longtime backer SoftBank Group Corp. and existing creditors to slash over $3 billion of debt and wipe out most of its shares.
It’s also seeking to reject more than 60 leases across North America and will use the court process to renegotiate other contracts, Chief Executive Officer David Tolley said in court papers. WeWork’s real estate footprint sprawled across 777 locations in 39 countries as of June 30, with occupancy near 2019 levels. But the enterprise remains unprofitable.
“WeWork is requesting the ability to reject the leases of certain locations, which are largely non-operational and all affected members have received advanced notice,” the company said in a statement. Long Saga WeWork’s collapse into bankruptcy is the culmination of a years-long saga for the New York-based company, whose sudden rise and precipitous fall have captivated Wall Street and Silicon Valley alike. The firm’s undoing arguably started in 2019.
In a matter of months, the company went from planning an IPO to laying off thousands and procuring a multi-billion-dollar bailout. WeWork was never a conventional business — for a substantial portion of its existence, it operated with a stated mission to “elevate the world’s consciousness. ” The spiritual ethos that founder Adam Neumann and his wife, executive and co-founder Rebekah Neumann, fostered sometimes made the enterprise look more like a religion than a startup.
The company eventually went public in 2021 through a combination with a special purpose acquisition company, two years after its initially planned IPO. But that didn’t stop WeWork from hemorrhaging cash. While WeWork reached a sweeping debt restructuring deal in early 2023, it quickly fell into trouble again.
In August, it said that there was “substantial doubt” about its ability to continue operating. Weeks later, it said it would renegotiate nearly all its leases and withdraw from “underperforming” locations. This time, it struck a restructuring agreement with creditors representing roughly 92% of its secured notes, and said it would streamline its rental portfolio of office space, according to the company’s statement.
Other shared office-space firms have also stumbled after the pandemic upended working habits. Knotel Inc. and subsidiaries of IWG Plc sought bankruptcy in 2021 and 2020, respectively.
That’s often the only option for floundering companies with costly leases, as US law enables insolvent firms to shed cumbersome contracts that are hard to cancel otherwise. The company said it intends to file recognition proceedings in Canada, though its locations elsewhere are not part of the bankruptcy process. Franchisees around the world are also not affected, and it said it would continue servicing existing members, vendors, partners and other stakeholders as part of ordinary business.
The bankruptcy is WeWork Inc. , 23-19865, U. S.
Bankruptcy Court for the District of New Jersey (Newark). –With assistance from Ameya Karve, Tan Hwee Ann and Dana El Baltaji. (Updates with additional details throughout.
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From: mercurynews
URL: https://www.mercurynews.com/2023/11/07/wework-goes-bankrupt-signs-pact-with-creditors-to-cut-debt/
