The financial crisis is deepening at
WeWork.
The troubled short-term real-estate rental firm disclosed in a securities filing that it declined to make interest payments that were due Monday on five sets of notes due in 2027. The company had been scheduled to pay noteholders $37.3 million in cash and $57.9 million in the form of additional notes.
WeWork (ticker: WE) said that under the terms of the notes, it has 30 days to make the payments before the event would be considered a default. The company seems to be using the step to force lenders to negotiate revised terms.
“Entering the grace period is intended to allow discussions with certain stakeholders in the company’s capital structure to commence, while also enhancing liquidity as the company continues to take action to implement its strategic plan,” WeWork said in the filing. “As part of this strategic plan, the company is focused on rationalizing its real-estate footprint, and improving its capital structure.”
WeWork has been struggling financially for years, and the troubles have intensified in recent months. In early September, the company said in a letter to shareholders that despite efforts to improve the company’s operations and to reduce its real-estate footprint, lease liabilities remained too high, and were “dramatically out of step with current market conditions.” The company said at the time that it was working with landlords to renegotiate “nearly all of our leases.”
In an update posted to the company’s website Monday commenting on the decision not to make the scheduled interest payments, WeWork said it is making progress on the lease negotiations, and that in parallel it is in discussions with “stakeholders” to improve the company’s balance sheet. “By improving our capital structure, we will be better positioned to continue to invest in our industry-leading member experience and in our own economically sustainable growth for years to come,” the company wrote.
The company added it has enough liquidity to make the interest payments that were due on Monday, and that it may decide to make them in the future.
WeWork also said that the ongoing financial negotiations will have no direct impact on customers or employees. “We are working to make significant progress over the next few months to remain the global leader in flexible work,” the company said. “WeWork is here to stay.”
But there are obviously doubts on the Street about whether that future will result in a trip through reorganization in bankruptcy court. WeWork stock—which just had a 1-for-40 reverse split just over a month ago—is down 20% on Tuesday, and is nearly 96% lower for the year to date.
Write to Eric J. Savitz at [email protected]
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