WeWork said Monday it is skipping debt payments, but predicted its lenders would take the news in stride.
Investors certainly didn’t, sending WeWork’s stock down 24 percent in the first half-hour of trading Tuesday.
The struggling co-working company said it would not make a pair of interest payments totaling approximately $95 million, the New York Times reported. Interim CEO David Tolley said the move was “typical” of companies looking to open negotiations with lenders.
“I believe they will absolutely understand our decision to enter into the grace period,” he said in an interview.
WeWork said it had enough cash on hand to make the payments, which were due Monday, but decided to enter the 30-day grace period. As of the end of June, WeWork had $205 million in cash and access to a $475 million credit line. Its share price fell to a 52-week low Tuesday of $2.22 and is down 96 percent this year.
Months ago, WeWork made a deal with lenders — including SoftBank — to cancel or convert into equity roughly $1.5 billion of debt, giving the company until 2027 to repay much of it. That deal was made in anticipation of a commercial real estate market recovery that hasn’t transpired.
While the missed interest payments are not a death knell for WeWork, they surely did not allay concerns that the once-darling co-working firm is headed for bankruptcy.
Last month, WeWork told its lenders that it would try to renegotiate “nearly all” of its leases on the heels of staggering losses. A company spokesperson clarified that WeWork wanted to stay at its buildings, but needed more flexibility.
In August, WeWork had admitted “substantial doubt” that it would stay in business. Since the pandemic, the company has lost $11.4 billion and its stock has cratered, forcing WeWork to engineer a 1-for-40 reverse stock split to raise the share price to remain on the New York Stock Exchange.
Two of WeWork’s top executives, CEO Sandeep Mathrani and chief financial officer Andre Fernandez, resigned from the company in May. In recent months, several restructuring experts joined WeWork’s board.
— Holden Walter-Warner
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