Beleaguered shared office giant WeWork, which has been in dire financial straits for years, announced on Monday that it had filed for bankruptcy in a bid to negotiate down its debt.
The coworking company said its bankruptcy impacts operations in the US and Canada, but “global operations are expected to continue as usual.”
The bankruptcy filing was a stark turn of events for the New York-based company, which was once a start-up darling promising to reshape the office sector globally.
Photo: AFP
It at one point attracted huge infusions from investors, including Softbank Group Corp and venture capital firm Benchmark Capital Advisors LLC. WeWork was considered the most valuable US start-up as recently as 2019, worth US$49 billion.
However, elusive profitability, the rise of telecommuting, a drop in tenants and years of massive costs have hit the company hard. In early August, WeWork warned the US Securities and Exchange Commission that it feared for its survival: “Substantial doubt exists about the company’s ability to continue as a going concern.”
The company has scrambled to sell off part of its business, renegotiate leases and shut branches, but it still lost more than US$1 billion in the first half of this year.
Nonetheless, the company put a positive spin on the news.
“Now is the time for us to pull the future forward by aggressively addressing our legacy leases and dramatically improving our balance sheet,” WeWork chief executive David Tolley said in a statement. “We defined a new category of working, and these steps will enable us to remain the global leader in flexible work.”
In practical terms, Chapter 11 proceedings enable a company to renegotiate its debt with creditors and present a plan to reorganize its business, while remaining under the protection of the law for a period that can extend over several years.
WeWork hopes to negotiate a “significant” reduction in its debt. In particular, the group hopes to “terminate the leases on a number of locations” that are not making enough money, pointing out that the owner companies “have received advance notice.”
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