WeWork cleared to exit bankruptcy, shedding co-founder Neumann legacy
WeWork to convert billions in debt to shares for creditors
WEWORK won bankruptcy court approval to shed billions in debt, drop unprofitable leases from its office workspace portfolio and leave behind the legacy of co-founder Adam Neumann.
US bankruptcy judge John K Sherwood on Thursday (May 30) said he’d approve the co-working company’s restructuring plan, clearing WeWork’s path to exiting bankruptcy under the ownership of its senior lenders.
“It’s been a little more than six months but it’s felt like a lifetime,” company attorney Steven Serajeddini said, referring to tough negotiations and various disputes WeWork navigated since it filed bankruptcy last year.
In the coming days, the company plans to execute all the financial contracts needed to fund the reorganisation, attorney Ciara Foster told Sherwood.
The move marks WeWork’s final break with Neumann, who unsuccessfully made a last-minute bid to restructure the company under an alternate plan that was rejected by the company’s current managers and lenders.
Epic fall
The company struggled to bounce back from its epic fall nearly five years ago after a botched initial public offering.
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Under Neumann, WeWork was the fastest-growing co-working company in the world. The former CEO led the firm on an aggressive growth trajectory, taking on scores of long-term leases with landlords, fixing up office spaces, then renting it out to workers or companies on a shorter-term basis.
By 2019, WeWork was the largest private-sector tenant in both London and New York, among two of the largest office markets in the world. It was also gearing up for one of the decade’s most anticipated IPOs. Yet the company was burning through cash, with an unclear path to profitability.
Neumann’s bet proved ultimately disastrous for WeWork, as investors and board members grew concerned about the company’s corporate governance and aggressive growth strategies. Shortly after, the firm said it would delay its IPO and Neumann left the company.
New valuation
WeWork said its restructuring cuts its future rent obligations in half, or about US$12 billion overall.
The restructured company will be worth between US$665 million and US$865 million when it leaves Chapter 11, the company said in court papers. That’s a fraction of the firm’s peak valuation of US$47 billion.
WeWork secured creditors are taking substantial haircuts in the restructuring and are anticipated to get between three and five cents on the US dollar depending on the debt they own, according to a court filing.
Lower-ranking bondholders are anticipated to receive four cents on the US dollar under the restructuring, creditor attorney Kris Hansen said in court. Other unsecured creditors are expected to get back just one cent on the US dollar, but would have wiped-out completely in a liquidation, he said.
WeWork said on Thursday the restructuring marks the end of “substantial operating losses that characterised the company’s years of hypergrowth and subsequent contraction.” BLOOMBERG
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