Flexible space provider WeWork, which is backed by Japanese technology major SoftBank Group, filed for Chapter 11 bankruptcy protection. The company, which was once valued at $47 billion, has entered into restructuring support agreement with its key financial stakeholders, with a view to drastically reducing its existing funded debt.
As part of the process, the office sharing company plans to reject largely non-operational leases of certain locations to position itself for operational and financial success.
The bankruptcy filing is limited to WeWork’s locations in the U.S. and Canada. Other locations as well as its franchisees around the world are not part of the process.
As per the bankruptcy filing, the company listed assets of $15.06 billion and liabilities of $18.66 billion as of June 30.
WeWork in September had initiated a process to renegotiate nearly all its leases as the loss-making firm tried to fix its financial troubles. As part of the move, the company planned to exit unfit and underperforming locations and to reinvest in its strongest assets.
WeWork then had stated that it was on a year-long transformation following unsustainable hypergrowth to reduce cost, grow revenue and strengthen balance sheet.
In a statement, WeWork now said it has filed for protection under Chapter 11 and intends to file recognition proceedings in Canada under Part IV of the Companies’ Creditors Arrangement Act.
During the restructuring process, the company’s spaces would remain operational.
The Restructuring Support Agreement or RSA has been entered with holders representing around 92% of its secured notes. SoftBank owns about 60 percent of WeWork.
David Tolley, CEO of WeWork said, “Now is the time for us to pull the future forward by aggressively addressing our legacy leases and dramatically improving our balance sheet. We defined a new category of working, and these steps will enable us to remain the global leader in flexible work.”
In the process, Kirkland & Ellis LLP and Cole Schotz P.C. are serving as legal counsel, and Alvarez & Marsal North America, LLC is serving as financial and restructuring advisor.
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