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By Ethan M Steinberg and Amelia Pollard
Former high-flying startup WeWork Inc. filed for bankruptcy listing nearly $19 billion dollar of debts, a fresh low for the co-working company that struggled to recover from the pandemic.
The New York-based company said it had struck a restructuring agreement with creditors representing roughly 92 per cent of its secured notes and would streamline its rental portfolio of office space, according to a statement. The Nov. 6 Chapter 11 filing in New Jersey listed assets of $15 billion.
WeWork’s collapse into bankruptcy is the culmination of a years-long saga for the company, which was once the biggest office tenant in Manhattan. Its sudden rise and precipitous fall have captivated Wall Street and Silicon Valley alike.
The firm’s undoing arguably started in 2019. In a matter of months, the company went from planning an IPO to laying off thousands and procuring a multi-billion-dollar bailout.
Pandemic Changes
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Other shared office-space firms have also stumbled after the pandemic upended working habits. Knotel Inc. and subsidiaries of IWG Plc sought bankruptcy in 2021 and 2020, respectively.
While WeWork reached a sweeping debt restructuring deal in early 2023, it quickly fell into trouble again. In August, it said that there was “substantial doubt” about its ability to continue operating. Weeks later, it said it would renegotiate nearly all its leases and withdraw from “underperforming” locations.
Bankruptcy is often the only option for floundering companies with costly leases, as US law enables insolvent firms to shed cumbersome contracts that are hard to cancel otherwise.
WeWork’s real estate footprint sprawled across 777 locations in 39 countries as of June 30, with occupancy near 2019 levels. But the enterprise remains unprofitable.
Reject Leases
“WeWork is requesting the ability to reject the leases of certain locations, which are largely non-operational and all affected members have received advanced notice,” it said in the statement.
WeWork said it intends to file recognition proceedings in Canada, though its locations elsewhere are not part of the bankruptcy process. Franchisees around the world are also not affected, and it said it would continue servicing existing members, vendors, partners, and other stakeholders as part of ordinary business.
WeWork was never a conventional business — for a substantial portion of its existence, it operated with a stated mission to “elevate the world’s consciousness.” The spiritual ethos that founder Adam Neumann and his wife, executive and co-founder Rebekah Neumann, fostered sometimes made the enterprise look more like a religion than a startup.
The company eventually went public in 2021 through a combination with a special purpose acquisition company, two years after its initially planned IPO.
But that did not stop WeWork from hemorrhaging cash. A final attempt at a turnaround in March saw the company ink an out-of-court restructuring that slashed around $1.5 billion of debt and extended other maturities.
