WeWork CEO David Tolley and the global flexible space provider have begun a comprehensive reorganization under Chapter 11 of the U.S. Bankruptcy Code to strengthen the company's finances as it fights for survival.
Tolley led the effort as an established veteran of complex bankruptcy restructurings. He has experience in this area, having served as co-chief restructuring officer and chief financial officer of global satellite communications company Intelsat SA when it filed for bankruptcy reorganization in May 2020. That background played a role in SoftBank, WeWork's largest creditor and financial backer, deciding to appoint 55-year-old Tolley to WeWork's board in February.
Tolley’s primary goal is to protect the brand, he said, when being named permanent CEO in August after months of holding the job on an interim basis. Tolley turned to bankruptcy court to continue that work, saying in a statement upon the Chapter 11 filing: “WeWork has a deliberate and value maximizing lease rejection plan that is expected to position the company for operational and financial success.”
For his actions taking WeWork into bankruptcy as part of the company's turnaround plan, Tolley is the Person in the News.
WHO: David Tolley, CEO of WeWork Inc., the New York-based flexible workspace provider with over 750 locations in 37 countries worldwide. It has more than 230 leased locations in the United States, CoStar data shows, and about 20 in Canada.
STREET CRED: Tolley received an MBA from Columbia Business School and a Bachelor of Arts in economics and history from the University of Michigan. He has over 25 years of experience creating and executing strategies that increase corporate valuation, cash flow and revenue. In addition to serving as CFO at Intelsat, he has also served as CFO of satellite firm OneWeb, was a private equity partner at Blackstone from 2000 to 2011 where he focused on investments in the communications and media industries, and was vice president in the investment banking division of Morgan Stanley. He now serves on the boards of DigitalBridge and KVH Industries.
WHAT’S HAPPENING: Through its Chapter 11 bankruptcy reorganization, Tolley is looking to improve WeWork’s estate footprint and reduce its current lease liabilities. The company's liabilities were over two-thirds of total operating expenses in the second quarter, which is too high and "dramatically out of step with current market conditions,” according to Tolley. He took action ”to permanently fix our inflexible and high-cost lease portfolio to achieve the sustainable operating model."
WHY IT MATTERS: WeWork is requesting to reject 65 direct office leases of certain locations that are unprofitable and largely nonoperational. That is likely to affect office markets in several major markets.
WHAT’S NEXT: Tolley said in an email sent by WeWork public relations this past week that "The step we took this week to restructure our business is a continuation of the work we have been doing to aggressively address our legacy leases. WeWork has a strong foundation, a dynamic business, and a bright future." The U.S. Bankruptcy Court for the District of New Jersey has scheduled a meeting for Nov. 28 at 10 a.m. in Newark on WeWork’s motion to reject leases.