The Softbank-backed office space-sharing company filed for bankruptcy protection in Newark, New Jersey, bankruptcy court on Monday, seeking to address more than $4 billion in debt and unsustainable rent costs. WeWork, once valued at $47 billion, expanded at breakneck speed but racked up steep losses on its long-term lease obligations after a post-COVID plunge in demand for office space.
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After an earlier effort to restructure its debts failed to stave off bankruptcy, WeWork reached a restructuring agreement with over 90% of its bondholders to convert $3 billion of debt into equity in the company. Softbank, which currently owns about 70% of the company, would retain an equity stake under the proposed restructuring.
“Softbank has been a true supporter of this company,” WeWork attorney Steven Serajeddini said at Wednesday’s court hearing. “It has backed the company’s growth and is now backing its restructuring.”
WeWork managed to renegotiate 590 leases before filing for bankruptcy, saving about $12.7 billion in future rent payments. But it says it has more work to do to get rent costs under control.
The company has identified 69 leases it intends to break in the initial days of its bankruptcy, including 41 in New York City, and it could seek to reject additional leases later in its bankruptcy. WeWork said it is seeking to renegotiate terms on other leases with 400 landlords.
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US bankruptcy laws give debtors enormous leverage to walk away from leases, according to Ann Chandler, a real estate attorney. “So much of this is outside of landlords’ control. There’s really very little they can do during the initial stage of a bankruptcy,” Chandler said.
WeWork on Wednesday will ask US Bankruptcy Judge John Sherwood, who is overseeing its Chapter 11 proceedings, to sign off on initial steps in its case, including routine requests such as continuing to pay its 2,700 employees and critical vendors like building maintenance and cleaning services.
WeWork entered bankruptcy with approximately $164 million of cash on hand, according to court filings.
