WeWork said yesterday that it would not make two sets of interest payments totaling about $95 million, a move meant to jump-start negotiations with its lenders at the same time it tries to cut costs with its landlords, the New York Times reported. The missed interest payments will undoubtedly spur speculation of a bankruptcy filing. But WeWork says it has the cash on hand, and the company has a 30-day grace period to make the payments, which were due Monday. At the end of June, it had $205 million in cash and access to a credit line worth $475 million. “I believe they will absolutely understand our decision to enter into the grace period,” WeWork’s interim chief executive, David Tolley, said in an interview. He called the move “typical” as a “precursor to a conversation.” Skipping an interest payment is not necessary to negotiate with lenders. But it is a move sometimes used by indebted companies to put pressure on lenders to restrike deals under more favorable terms. In the first half of this year, WeWork’s operations consumed $530 million. The co-working company warned investors in August that “substantial doubt exists about the company’s ability to continue as a going concern,” without taking measures like decreasing its lease costs and making its debt load more manageable. In early September, WeWork said that its lease costs made up more than two-thirds of its operating liabilities, a heavy weight on its cash flow that it was trying to alleviate by renegotiating nearly all of its leases and pulling out of some unprofitable locations.
