WeWork Inc. (NYSE:WE) has received approval from a bankruptcy court to eliminate billions in debt, discard unprofitable leases from its office workspace portfolio, and move forward without the shadow of co-founder Adam Neumann.
US Bankruptcy Judge John K. Sherwood gave the green light on Thursday to the co-working company’s restructuring plan, paving the way for WeWork to exit bankruptcy under the ownership of its senior lenders.
“It’s been a little more than six months but it’s felt like a lifetime,” said company attorney Steven Serajeddini, acknowledging the arduous negotiations and disputes WeWork faced since filing for bankruptcy last year.
In the days ahead, the company intends to finalize all financial contracts necessary to finance the reorganization, attorney Ciara Foster informed Sherwood.
This development marks WeWork’s definitive separation from Neumann, who made a failed attempt to restructure the company under an alternative plan, ultimately rejected by the current management and lenders.
Epic Decline
WeWork struggled to recover from its dramatic downfall nearly five years ago following a botched initial public offering. Under Neumann’s leadership, the company experienced rapid growth, becoming the fastest-growing co-working company globally. Neumann’s strategy involved acquiring numerous long-term leases, renovating office spaces, and then leasing them out on shorter terms.
By 2019, WeWork became the largest private-sector tenant in London and New York, two of the world’s largest office markets, and was poised for a highly anticipated IPO. However, the company faced significant cash burn and lacked a clear path to profitability.
Ultimately, Neumann’s aggressive growth tactics and corporate governance issues led to investor and board concerns. The IPO was postponed, and Neumann departed from the company.
New Valuation
WeWork’s restructuring is set to halve its future rent obligations, totaling around $12 billion.
The restructured company is expected to be valued between $665 million and $865 million upon exiting Chapter 11, a fraction of its peak valuation of $47 billion.
Under the restructuring, secured creditors are expected to receive between 3 and 5 cents on the dollar, while lower-ranking bondholders anticipate 4 cents on the dollar. Other unsecured creditors may receive just 1 cent on the dollar, though they would have faced total losses in a liquidation scenario.
WeWork stated that the restructuring signifies the end of “significant operating losses” that characterized its years of hypergrowth and subsequent contraction.
The bankruptcy case is WeWork Inc., 23-19865, U.S. Bankruptcy Court for the District of New Jersey (Newark).
Featured Image: Freepik
Author Faith Yakubu 
