This article is from the Australian Property Journal archive
THE poster child for coworking and once valued as much as US$47 billion, WeWork, has filed for bankruptcy in the United States.
In a widely anticipated move, WeWork has filed for protection under Chapter 11 of the US Bankruptcy Code, with reported reported liabilities of $10 billion to $50 billion.
WeWork’s locations outside of the US and Canada are not part of this process and will be impacted, along with WeWork’s franchisees around the world.
In a statement, CEO David Tolley said the protection will allow the company to streamline its real estate footprint and restructure its capital and financial position.
“Now is the time for us to pull the future forward by aggressively addressing our legacy leases and dramatically improving our balance sheet,” Tolley continued. “We defined a new category of working, and these steps will enable us to remain the global leader in flexible work. I am deeply grateful for the support of our financial stakeholders as we work together to strengthen our capital structure and expedite this process through the Restructuring Support Agreement. We remain committed to investing in our products, services, and world-class team of employees to support our community.”
Tolley said the company will continue servicing its existing members, vendors, partners, and other stakeholders in the ordinary course of business. WeWork expects to have the financial liquidity to execute these proceedings and continue business in the ordinary course.
The company maintains it has strong support of its key financial stakeholders and has entered into a Restructuring Support Agreement (“RSA”) with holders representing approximately 92% of its secured notes to drastically reduce the company’s existing funded debt and expedite the restructuring process.
At the same time, WeWork will further rationalise its commercial office lease portfolio.
“WeWork has a deliberate and value maximizing lease rejection plan that is expected to position the company for operational and financial success. As part of today’s filing, 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,” Tolley said.
Co-founder Adam Neumann, who was ousted in 2019 after his erratic behaviour and spending started raising concerns, and a public float failed, sending its value plummeting, described the move as “disappointing”.
“It has been challenging for me to watch from the sidelines since 2019 as WeWork has failed to take advantage of a product that is more relevant today than ever before,” Neumann said.
The company was bailed out its major investor Japanese investment group SoftBank, which has sunk tens of billions of dollars in the company to keep it afloat.
WeWork lost $349 million in the June quarter – and that result was a $238 million improvement on the first three months of the year. After finally going public in October 2021, its share price has been wiped. Having sat at a 52-week high of US$130.80, the company ‘s shares have lost around 99% of their value this year.
WeWork had 777 locations in 39 countries, according to the company, at the end of June.
