WeWork, the co-working company, has announced that it will not make two sets of interest payments totaling approximately $95 million. The move is intended to initiate negotiations with its lenders while also attempting to reduce costs with its landlords. Speculation of a potential bankruptcy filing has arisen as a result of the missed payments, but WeWork assures that it has enough cash on hand and a 30-day grace period to make the payments. The company had $205 million in cash and access to a credit line worth $475 million at the end of June.
In the first half of 2023, WeWork’s operations consumed $530 million. The company had previously warned investors about its ability to continue as a going concern without taking measures to decrease lease costs and manage its debt load. WeWork has been renegotiating leases and withdrawing from unprofitable locations in order to alleviate its heavy lease costs. However, the company’s interim CEO, David Tolley, stated that no decisions have been made regarding filing for bankruptcy. WeWork has been working to stabilize its business amidst a transformation in the commercial real estate industry, where the rise of remote work has caused uncertainty in the value of office space.
Despite the challenges, Mr. Tolley sees the increasing need for flexibility as an opportunity for WeWork, assuming it can reduce lease expenses and debt. The company reported a 4% year-over-year increase in consolidated revenue for the second quarter of 2023 and believes it can continue to invest in its business and serve its customers. While the future of flexible office space remains uncertain, some analysts believe there is still a growing need for flexibility, even if the current model fails. WeWork aims to position itself as a critical part of the future of office space.
