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WeWork, the commercial real estate firm that became synonymous with flexible co-working spaces, plans to file for bankruptcy as soon as next week, The Wall Street Journal reported on Tuesday.
The company that once embodied the future of the workplace, and which was valued at $47 billion during its prime under founder and original CEO Adam Neumann, is considering filing a chapter 11 petition in New Jersey, The WSJ’s sources familiar with the matter said.
The company’s struggles over the last few years have been no secret, but the direness of the situation seemed to become more plainly apparent after WeWork itself admitted in a financial filing in August that there was “substantial doubt” the company could survive much longer.
In September, the embattled company said it would attempt to renegotiate “nearly all” of its leases in a conference call with landlords in an attempt to seek out less expensive rents. Then earlier this month, credit rating provider Fitch Ratings downgraded the commercial firm’s rating from a CC, which means default seems probable, to a C, indicating that a “default-like” process is now underway.
On Oct. 2, WeWork missed interest payments that were owed to bondholders, which placed the company on a 30-day grace period in which to make those payments. If the firm did not make the payments, it would be considered an event of default. As of Tuesday, WeWork said it had made an agreement with bondholders to give the company an additional seven days to negotiate with stakeholders before going into default.
A spokesperson for WeWork declined to comment to The WSJ on the company’s potential bankruptcy filing, other than to say such claims were “speculation.” The spokesperson also added in regards to a securities filing from Tuesday that “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.”
In August, the company saw some significant board changes after three directors resigned over a disagreement in regards to board governance and the company’s strategic direction, a securities filing shows. Following those resignations, WeWork named four new directors who specialize in complex financial restructurings. Over the last several months, those directors have been negotiating with WeWork’s creditors over a restructuring plan in preparation for bankruptcy.
Amidst WeWork’s growing financial woes, the company still has a vast portfolio of locations across the globe. As of June, WeWork had 777 locations across 39 countries, with 229 of those locations based in the U.S., according to securities filings. The firm has an estimated $10 billion in lease obligations coming due starting in the second half of 2023 through the end of 2027, plus $15 billion starting in 2028, according to filings.
Securities filings show the company also spent $530 million during the first six months of 2023 and had about $205 million in cash as of June.
WeWork built its reputation on a flashy model that saw investors putting their money in what they saw as futuristic workspaces with sleek designs and perks, like beer and kombucha, to build community among workers while eschewing the traditional office. The money WeWork poured into locations and expansion was never quite recovered, however, as fewer individuals and companies opted to make use of their spaces, a problem that became exacerbated in the wake of the pandemic when working from home became ubiquitous.