WeWork Inc. skipped curiosity funds totaling $95 million due on Monday on 5 of its bonds, triggering a 30-day grace interval. This comes two months after the struggling co-working start-up warned that “substantial doubt exists” about staying in enterprise and one month after WeWork CEO David Tolley stated the corporate “will seek to negotiate terms with our landlords” for underperforming places.
“As such, today we entered into the 30-day grace period provided to us under our secured notes’ indentures and withheld the associated interest payments,” WeWork wrote in a press release on its web site on Monday.
A regulatory filing exhibits the co-working agency withheld $37.3 million of money and $57.9 million of curiosity funds on the next notes, all due in 2027:
- 15.000% First Lien Senior Secured PIK Notes due 2027;
- 11.000% Second Lien Senior Secured PIK Notes due 2027;
- 11.000% Second Lien Exchangeable Senior Secured PIK Notes due 2027;
- 12.000% Third Lien Senior Secured PIK Notes due 2027; and
- 12.000% Third Lien Exchangeable Senior Secured PIK Notes due 2027.
The submitting continued, “The Company has a 30-day grace period to make the Interest Payments before such non-payment constitutes an “occasion of default” with respect to the Notes.”
It added: “The Company has the liquidity to make the Interest Payments, and may in the future decide to do so.”
If WeWork has sufficient liquidity to service its debt, why wouldn’t it miss funds?
Perhaps a dialog the WeWork CEO had with The New York Times can shed some mild on this query:
“I believe they will absolutely understand our decision to enter into the grace period,” WeWork’s interim chief government, David Tolley, stated in an interview. He referred to as the transfer “typical” as a “precursor to a conversation.”
“Skipping an interest payment is not necessary to negotiate with lenders. But it is a move sometimes used by indebted companies to put pressure on lenders to restrike deals under more favorable terms,” NYTimes famous.
In early September, Tolley stated the co-working start-up “will seek to negotiate terms with our landlords” and “part of these negotiations, we expect to exit unfit and underperforming locations and to reinvest in our strongest assets as we continuously improve our product.”
A month earlier than that, WeWork shares crashed after the corporate acknowledged in a submitting:
…because of the Company’s losses and projected money wants, mixed with elevated member churn and present liquidity ranges, substantial doubt exists in regards to the Company’s skill to proceed as a going concern.
The Company’s skill to proceed as a going concern is contingent upon profitable execution of administration’s plan to enhance liquidity and profitability over the subsequent 12 months, which incorporates, with out limitation:
- Reducing lease and tenancy prices by way of restructuring actions and negotiation of extra favorable lease phrases;
- Increasing income by lowering member churn and growing new gross sales;
- Controlling bills and limiting capital expenditures; and
- Seeking extra capital by way of issuance of debt or fairness securities or asset gross sales.
WeWork shares have been in freefall for a lot of the yr.
Covid killed the versatile workplace trade. WeWork is likely to be on its final leg.