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Things are really looking dire for WeWork now, as the company’s finances are in such a state that it may be forced to accept an offer from embattled, former CEO Adam Neumann’s new company Flow.
As WeWork hustles to raise $400 million in funding to get out of bankruptcy, the company’s unsecured creditors have said the company should seriously consider Neumann’s offer, The Financial Times has reported.
Neumann reportedly made his own bid to buy back the company for about $600 million, and an attorney for Flow, Alex Spiro, said the company was willing to outbid other offers by 10 percent. WeWork, however, was unwilling to negotiate a deal by signing a non-disclosure agreement (the first step toward any bid), an attorney for WeWork said. However, the firm’s unsecured creditors appear to have a different take on the situation.
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“For the debtors to ignore potentially viable alternatives and not look for others is value-destructive and inexcusable,” an attorney representing a committee of unsecured creditors said in a court filing on Friday.
Under a proposed restructuring plan submitted by WeWork in February, the company’s senior lenders would own WeWork, and the company’s debt to unsecured creditors would likely be converted into equity in the reorganized company. At that time, a committee for unsecured creditors voiced doubt about the company’s ability to pay its lawyers or its rent, which would result in “administrative insolvency.”
WeWork has said auctioning off the company would be a last resort and that it expects to get out of Chapter 11 by the end of next month. Still, unsecured creditors have their doubts, saying that the company has not secured the financing it needs to get out of bankruptcy. Less than a third of the company’s leases have been renegotiated and it has yet to pay over $40 million in rent, including several millions of dollars of April rent, the committee has claimed.
At this point, the committee of unsecured creditors is allowing WeWork 30 more days to file a new plan, with the condition that the company provide Flow and any other potential bidders with enough information to make a proposal and secure financing to purchase the company.
At the beginning of April, WeWork announced a plan to reduce its lease obligations by about $8 billion through canceling 150 leases, renegotiating about the same number of leases, and leaving 150 leases as they are. After its expected emergence from bankruptcy, the company anticipates having a little over 20 million square feet of office space across the world, down from the nearly 44 million square feet of office space it had as of December 2022, court papers show.
WeWork has partially cut down on its lease obligations by withholding post-petition rent. It still has about 50 leases to be settled.
In the course of these negotiations, however, WeWork has oftentimes ended up paying out rent it previously withheld, which has contributed to its cash shortfall — and potentially gives Neumann an in.
“No one wants to put in a new money [loan],” a lawyer involved in the case told The Financial Times.
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