Global flexible workplace provider WeWork has missed interest payments totaling about $95 million in what the money-losing company said is a deliberate attempt to help start conversations with some lenders as it's already doing with landlords.
WeWork has a 30-day grace period to make the interest payments of $37.3 million and $57.9 million each before such nonpayment constitutes an “event of default,” the New York-based firm said in a regulatory filing late Monday. Both payments were payable on Monday originally.
The company said it has the liquidity to make the interest payments and may still decide to do so. This is a move sometimes used by indebted companies to put pressure on lenders to reach more favorable terms, a WeWork spokesperson told CoStar News.
WeWork’s lenders, besides majority shareholder SoftBank, also include BlackRock, King Street Capital Management, and Brigade Capital Management, WeWork said earlier this year.
A key part of WeWork's strategic plan centers on adjusting its real estate footprint. The company’s lease liabilities totaled over 67% of operating expenses and 74% of revenue in the second quarter, far higher than that of rivals such as Industrious, which has a higher percentage of locations in management partnership agreements without leasing risk.
WeWork recently said it’s renegotiating nearly all its leases after it has exited or amended 590 leases since the fourth quarter of 2019. It also has cut $12.7 billion in future lease payments, as the market shifted and it sought to rein in costs incurred during its high growth. The company has had rent disputes with landlords in the United States and the United Kingdom.
"We are making progress in these ongoing discussions," WeWork Interim Chief Executive David Tolley said Monday in a blog post. "As these negotiations progress, we intend to advance in parallel a conversation with our stakeholders about strengthening our balance sheet. By improving our capital structure, we will be better positioned to continue to invest in our industry-leading member experience and in our own economically sustainable growth for years to come."
The company has said its lease obligations continue to be the “primary challenge and obstacle” to its cash flow, prompting it to warn that “substantial doubt exists" about its ability to continue as a going concern.
The missed interest payments came just after WeWork completed a financial restructuring with investors including majority shareholder SoftBank in May that cut its debt by about $1.2 billion and extended most of its debt maturity to 2027.
WeWork's cash and cash equivalents declined to $205 million in the second quarter from $625 million a year earlier.