A group of Wall Street firms that lent hundreds of millions of dollars to WeWork is exploring the possibility of a bankruptcy filing that could help the company exit from expensive office leases, one of several options under discussion, WSJ Pro Bankruptcy reported. After WeWork raised doubts about its ability to stay in business a few weeks ago, fund managers including BlackRock, King Street Capital and Brigade Capital are holding preliminary talks about the company’s restructuring options and indicated that they would support a plan for WeWork to file for chapter 11 bankruptcy. The creditors haven’t presented proposals related to a bankruptcy or debt restructuring to the company’s board. Bankruptcy could allow WeWork to shed a portion of its expensive commercial real-estate leases and in the process hand over control of the company to creditors like themselves. If a bankruptcy process is pursued, WeWork would likely restructure its debts and offer creditors shares in the reorganized company. The fund managers have become some of WeWork’s most important investors after they lent $1.2 billion in new debt to the company in March, accounting for about 50% of the company’s long-term debt, according to public filings. If WeWork is able to renegotiate a sufficient number of its high-cost office leases with landlords and bring down its cost of rent, the company may not need to file for bankruptcy and the company could possibly avoid restructuring its debts.
