WeWork will make its first U.S. bankruptcy court appearance today, seeking to advance a restructuring proposal that could cut $3 billion in debt and shrink the company's real estate footprint, Reuters reported. The Softbank-backed office space-sharing company filed for bankruptcy protection in Newark, N.J., bankruptcy court on Monday, seeking to address more than $4 billion in debt and unsustainable rent costs. WeWork, once valued at $47 billion, expanded at breakneck speed but racked up steep losses on its long-term lease obligations after a post-COVID plunge in demand for office space. After an earlier effort to restructure its debts failed to stave off bankruptcy, WeWork reached a restructuring agreement with over 90% of its bondholders to convert $3 billion of debt into equity in the company. Softbank, which currently owns about 70% of the company, would retain an equity stake under the proposed restructuring. WeWork managed to renegotiate 590 leases before filing for bankruptcy, saving about $12.7 billion in future rent payments. But it says it has more work to do to get rent costs under control. The company has identified 69 leases it intends to break in the initial days of its bankruptcy, including 41 in New York City, and it could seek to reject additional leases later in its bankruptcy. WeWork said it is seeking to renegotiate terms on other leases with 400 landlords.
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In related news, WeWork's $3 billion debt for equity swap deal with its creditors marks the latest effort by top shareholder SoftBank to revive the troubled office-space provider and recoup some of the billions it has invested, Reuters reported. Whether the bet succeeds now depends on WeWork renegotiating the costly long-term leases it signed during the boom years and is now unable to pay, forcing it to file for bankruptcy on Monday. WeWork's long-term lease obligations of $13.3 billion accounted for more than 70% of its total debt as of end-June. Those deals, many agreed during a period of breakneck growth under founder Adam Neumann, became a crippling burden as the post-COVID shift towards working from home led to a plunge in demand for office space. Neumann quit as CEO in 2019, bowing to pressure from some investors. WeWork renegotiated some of its leases to reduce its obligations by more than $2 billion since the end of 2022. Read more.
