Softbank-backed flexible workspace provider WeWork plans to file for bankruptcy as early as next week, Reuters reported on Tuesday, quoting a source familiar with the matter.
US-based Wework was said to be struggling with a massive debt pile and hefty losses. The Wall Street Journal first reported the news, according to the report.
WeWork is considering filing a Chapter 11 petition in New Jersey, the WSJ reported, citing people familiar with the matter.
Earlier on Tuesday, WeWork said it had entered into an agreement with creditors for temporary postponement of payments for some of its debt, with the grace period nearing an end, the report said.
According to the report, WeWork had net long-term debt of $2.9 billion as of June end and more than $13 billion in long-term leases.
Shares of WeWork plunged following the bankruptcy plan news. WeWork shares fell by more than 40 percent in after-hours in New York trading on Tuesday, according to several reports.
WeWork was founded in 2010 with the vision to create environments where people and companies come together and do their best work. Since opening its first location in New York City, WeWork said it has grown into a global workplace provider committed to delivering flexible solutions, inspiring, safety-focused spaces and unmatched community experiences, information from its website showed. The company has co-working spaces and office spaces in 119 cities globally, according to its website.
In a note dated Oct 2, WeWork Chief Executive Officer David Tolley said the company has entered into the 30-day grace period provided to the company under its secured notes’ indentures and withheld the associated interest payments.
“We believe this action is best aligned with our business objectives, and also enhances liquidity as the company continues to take action to implement its strategic plan. During this period, we also intend to begin discussions with certain stakeholders in our capital structure to keep WeWork on track for long-term success. We currently have sufficient liquidity to make the associated interest payments and may in the future decide to do so,” he wrote.
This came after the company’s step to renegotiate nearly all of its leases with its landlords as part of its strategic plan to build a stronger and more profitable business.
“We are making progress in these ongoing discussions and are grateful to those who have partnered with us so far to find mutually beneficial and future-facing solutions,” he wrote.
“As these negotiations progress, we intend to advance in parallel a conversation with our stakeholders about strengthening our balance sheet. By improving our capital structure, we will be better positioned to continue to invest in our industry-leading member experience and in our own economically sustainable growth for years to come,” he added.