WeWork is preparing to file
for a potential chapter 11 bankruptcy protection before year-end as the New York City-based office space company’s onerous debt burden is becoming increasingly unsustainable, according to sources.
The ultimate timing of the filing is still uncertain and being negotiated between relevant parties, the sources said. Plans may change pending the outcome of lease negotiations between WeWork and its landlords, and the company may restructure its debt on an out-of-court basis, they added.
Whether WeWork would be able to relieve itself of its onerous debt load through an out-of-court versus an in-court proceeding has been the subject of ongoing speculation since the company announced in
early August that “substantial doubt exists about [their] ability to continue as a going concern” as a result of losses and projected cash needs, combined with its ongoing liquidity woes.
Despite completing a
distressed exchange this past spring, Fitch
stated on Oct. 5 that “WeWork has continued to burn through cash, with its balance dropping from $422 million in March to $205 million in June 2023.”
“The company's operating performance has also consistently underperformed against projections,” the ratings agency added. “Fitch expects the cash burn to persist through 2023 and it remains uncertain if improvements will be soon enough to avoid default.”
On Oct. 2, WeWork elected to
withhold interest payments totaling $37.3 million payable in cash and $57.9 million payable in the form of additional PIK notes after announcing last month that it had commenced a
global engagement with their landlords to fix its “inflexible and high-cost lease portfolio.”
At the time of publication, WeWork’s stock was trading at $1.98 per share.
WeWork and the company’s financial advisor PJT Partners declined to comment. Kirkland & Ellis, the company’s counsel, did not respond to a request for comment.