WeWork has announced that it will not make two interest payments totaling $95 million, as it attempts to negotiate with its lenders and cut costs with landlords. This move has sparked speculation about a potential bankruptcy filing, but WeWork maintains that it has enough cash on hand and a 30-day grace period to make the payments. The company has been grappling with financial challenges and is seeking to alleviate its heavy lease costs and make its debt more manageable. WeWork’s interim CEO, David Tolley, stated that the decision to enter the grace period is a typical move that precedes a conversation with lenders.
WeWork’s operations have consumed $530 million in the first half of this year, raising concerns about its ability to continue as a going concern. The company has been focusing on reducing its lease costs and exiting unprofitable locations to improve its cash flow. Negotiations with landlords will play a crucial role in determining the company’s credit profile and profitability. However, WeWork has not made any decisions about filing for bankruptcy, although doing so would make it easier to terminate unprofitable leases.
Earlier this year, WeWork reached a debt restructuring agreement with its lenders, including SoftBank, but the company now realizes that it may not be sufficient. WeWork has been working to decrease its lease costs for several years and appointed restructuring experts to its board in an effort to stabilize the company. As the commercial real estate industry faces uncertainty due to remote work and shifting demands for office space, WeWork sees opportunities for flexible office arrangements. The question remains whether the company will be financially able to take advantage of these potential opportunities.
