(Washington) It was to be the star value of a new model of flexible and shared offices. But the haphazard management of its founder and the pandemic got the better of WeWork, which had fallen out of favor for several years and which filed for bankruptcy on Monday.
“WeWork and certain of its subsidiaries have commenced Chapter 11 bankruptcy proceedings and intend to file recognition proceedings in Canada under the Bankruptcy Agreements Act. companies and creditors,” the group announced in a press release.
A procedure which does not concern its subsidiaries outside these two countries, added the company, which believes that its “global operations will continue, as usual”.
Concretely, the chapter 11 procedure allows a company to renegotiate its debt with its creditors as well as to present a plan for reorganizing its activity while remaining under the protection of the law, for a period which can extend over several years.
WeWork thus hopes to succeed in negotiating a “significant” reduction in its debt. The group hopes in particular, thanks to this procedure, to “end the leases of a certain number of locations” which do not bring it enough money, specifying that the owner companies “have already received notice”.
“It is time for us to look to the future by vigorously attacking our old leases and considerably improving our balance sheet,” said the group’s managing director, David Tolley, quoted in the press release, for whom “these measures will enable us to remain the world leader in flexible workspaces.”
WeWork had warned the American stock market watchdog (SEC) in early August that it feared for its survival: “There is substantial doubt about the company’s ability to continue its activities,” he declared.
The fate of New York-headquartered WeWork depends on “the successful execution of management’s plan to improve the company’s liquidity and profitability,” the company said in an SEC filing. .
A plummeting valuation
The company explained in particular that it wished to carry out a restructuring as well as negotiate more favorable conditions for a certain number of its leases.
The cause, according to the company: financial losses, liquidity needs and the drop in the number of tenants. It explained that it had lost billions of dollars during the first six months of 2023, due to the drop in demand linked to poor economic conditions.
The S&P rating agency announced on 1er November lower the group’s rating to the “partial default” category, after WeWork took stock of its problems paying interest on its debt.
“In our view, this constitutes a partial default on several tranches of its capital structure because WeWork is in dire straits, has not fulfilled its contractual obligations by paying interest on time and has not adequately compensated. adequate all creditors for having temporarily waived their rights,” explained S&P on Wednesday in a press release.
Once a star of start-ups, WeWork has raised billions of dollars from SoftBank Group. But the controversial management of its founder, Adam Neumann, worried investors, who ended up ousting him in 2019.
Then the pandemic emptied the offices and the company failed to recover while demand for professional premises fell with the rise of teleworking.
The fall of WeWork also greatly destabilized the Japanese group SoftBank Group and its Vision Fund, which had invested heavily in it, even forcing the Japanese group to save it for the first time at great expense, in the process damaging the visionary image of WeWork. his boss, Masayoshi Son.
WeWork was valued at up to $47 billion, but its stock was worth only 80 cents Monday evening at the close of the New York Stock Exchange, for a market capitalization of $44.49 million.