WeWork Reveals Post-Bankruptcy Financial Projections As Landlords Say Restructuring Close To 'Meltdown'

WeWork has unveiled the first detailed look at what the company expects to look like when it emerges from its Chapter 11 bankruptcy restructuring, a process that has become increasingly contentious as it approaches the six-month mark.

The coworking giant's projections, filed in bankruptcy court Tuesday, show the company plans to exit bankruptcy with 337 locations, including 178 offices across 38 cities in the U.S. and Canada. This is a massive reduction from the 850 locations it operated at its 2019 peak.

WeWork also stated that it could have as much as $443M in administrative claims, including unpaid postpetition rent that the company has withheld.

However, WeWork projected that it will hit profitability next year, with a net income of $101M. It estimates that it will lose $15M between June and December as it continues efforts to bring down costs.

WeWork also projects that it will end this year with nearly 300,000 members, a drop from the approximately 700,000 members it had at the end of 2022. It expects that it will be able to continue growing its membership to over 327,000 in the coming years, despite intending to close another eight locations in the years following bankruptcy. 

An investigation by Bisnow found that WeWork’s bankruptcy has tested member loyalty as locations have shuttered and some vendors have gone unpaid.

WeWork’s bottom line will be assisted by the sale of its business in India, as well as the final installments of payments for its Japanese business from SoftBank, which was announced earlier this year. 

Proceeds from those sales are estimated to be $100M, which, combined with an anticipated $400M in exit financing, would put the company on a solid financial footing going forward, the company said in the filing.

“This significant work is expected to result in the elimination of over $8 billion in total future rent commitments, viable economics throughout our real estate portfolio and a high-quality footprint that ensures we remain one of the world’s largest flexible work providers,” a WeWork spokesperson said in a statement. “We look forward to finalizing our advanced negotiations with parties in interest, and emerging from Chapter 11 in the coming weeks as a strong and sustainable business.”

Based on its projections, the company estimates that its equity value will be between $650M and $850M, which would be held largely by SoftBank and its other major lenders, including Yardi Systems. 

But despite WeWork's insistence on moving forward with the plan to emerge via financing from its existing backers, its former CEO, Adam Neumann, is pushing hard to take over the business.

Last month, Neumann’s Flow Global submitted a bid to buy back the company that he was exiled from for over $500M.

In a court record filed by Neumann’s camp Monday, the potential investors asserted that they delivered a nondisclosure agreement to WeWork Feb. 5 so that they could submit a proposal to purchase the company. In a Feb. 14 letter, WeWork’s lawyers claimed that the NDA was “unacceptable” without further explanation, Flow claims. 

The official committee of WeWork's unsecured creditors, which are mostly its landlords, argued in a court filing Friday that WeWork must demonstrate that it has made progress in its restructuring process and be forced to negotiate with potential investors, including Neumann.

“These cases appear on the brink of a meltdown,” the filing said. “In truth, the Debtors are no closer to finalizing their placeholder plan and obtaining critical post-petition financing than they were when these cases commenced.”

The filing alleges that WeWork has not obtained post-petition financing, has had to amend its business plan and has renegotiated less than a third of its U.S. and Canada lease portfolio. 

The company announced that the majority of its rightsizing has been completed, with the future of 90% of its portfolio determined, but many of those decisions have yet to be registered in bankruptcy court.

The creditors allege that WeWork, SoftBank and ​other financial backers and lenders have butt heads, causing them to miss “nearly all” previously set restructuring milestones, “while their liquidity continues to shrink,” according to the filing.

“To put it bluntly, Rome is burning and the Debtor and its [restructuring support agreement] parties are fiddling,” Friday’s filing by creditors said.

On Monday, the creditors also objected to WeWork’s request to extend its deadline for accepting and rejecting leases, as well as shortening notice periods.

A same-day hearing was called Tuesday to discuss whether a conditional disclosure statement approval hearing will be held on April 29.

In those proceedings, lawyers said that by expediting the notice process, WeWork is not allowing them to examine all filings on behalf of their landlords. The attorneys said WeWork has failed to negotiate with landlords, and they asked for judicial mediation. 

Brown Rudnick's Bankruptcy and Corporate Restructuring Practice Group Chair Robert Stark called WeWork’s motions a “sketchy deal” during the hearing.

“It is the oldest trick in the book, as old as there is anybody who's ever spelled bankruptcy, to run the clock on the process until there's no money left,” Stark said. “And then with the gun held, not to the litigants’ head but to the court's head, will you confirm the plan or will you send us all off into chaos?”

Ciara Foster, the Kirkland & Ellis attorney representing WeWork, argued that the company needs to move forward with its plan. WeWork declined to comment further on the hearing.

The judge scheduled the conditional disclosure statement approval hearing for Monday. 

“The one thing we cannot risk is the timeline here because otherwise there won’t be anything to negotiate over,” Foster said.

UPDATE, APRIL 23, 8:32 P.M. ET: The story has been updated to include information from a hearing Tuesday afternoon.