WeWork: Debt-Free Emergence After Lease Reset

WeWork Inc., the flexible office company once valued at $47 billion, filed chapter 11 petitions on November 6, 2023 in the U.S. Bankruptcy Court for the District of New Jersey. The filing followed a restructuring support agreement backed by SoftBank, an ad hoc group holding approximately 89% of the first-lien notes, and a third-party investor. The case centered on equitizing roughly $4 billion in secured debt and rationalizing a global lease portfolio with above-market rents. Judge John K. Sherwood confirmed the third amended plan on May 30, 2024, and WeWork emerged from chapter 11 on June 11, 2024 with a debt-free balance sheet.

Debtor(s)	WeWork Inc. (hundreds of jointly administered affiliates)
Court	U.S. Bankruptcy Court, District of New Jersey
Case Number	23-19865
Petition Date	November 6, 2023
Judge	Hon. John K. Sherwood
Confirmation Date	May 30, 2024

From Failed IPO to Chapter 11

WeWork was founded in 2010 and grew into a global flexible office platform with more than 700 locations across 34 countries by the time it filed for bankruptcy. By the end of 2018, the company had reached over 400,000 memberships across 425 locations in 100 cities and twenty-seven countries, and as of December 2022 it operated approximately 43.9 million rentable square feet globally, including 18.3 million rentable square feet in the United States and Canada. WeWork reached a peak valuation of $47 billion in 2019 ahead of a planned initial public offering that was pulled after investors questioned its path to profitability and governance under co-founder Adam Neumann. Neumann exited the company in late 2019, and SoftBank took a controlling position after investing nearly $20 billion.

WeWork went public through a SPAC merger with BowX Acquisition Corp in October 2021 at a valuation of approximately $9 billion. Since the de-SPAC transaction, WeWork continued to rationalize its lease portfolio, amending over 590 leases and reducing future rent obligations by over $12 billion while cutting selling, general, and administrative expenses by approximately $1.8 billion. Despite those measures, rising interest rates and remote-work trends compressed demand for flexible office space, and discounted sublease inventory from other tenants created significant competition. In April 2020, SoftBank had already withdrawn a $3 billion tender offer for WeWork shares, citing ongoing investigations and the impact of the pandemic.

By May 2023, Fitch Ratings assigned WeWork a CCC- issuer default rating, stating that default was "a real possibility" given the company's continued cash burn. CEO Sandeep Mathrani resigned earlier that month, and interim CEO David Tolley took over. WeWork outlined plans to raise capital, cut expenses, and renegotiate leases. In August 2023, WeWork disclosed in its second-quarter 10-Q that there was "substantial doubt" about its ability to continue as a going concern. The company reported a net loss of $397 million for the quarter and held $680 million of liquidity against $2.9 billion in long-term debt. Its market capitalization had fallen to roughly $270 million, and shares were trading near zero. Three board members resigned that same week over a disagreement on strategic direction, and the company began recruiting new directors with restructuring experience.

In early November 2023, after WeWork withheld approximately $95.2 million in interest payments on its first-lien notes, second-lien notes, second-lien exchangeable notes, third-lien notes, and third-lien exchangeable notes — approximately $37.3 million payable in cash and $57.9 million payable in kind — along with approximately $78 million in rent payments across its lease portfolio, a forbearance agreement with bondholders expired and S&P declared the company in "selective default". Four days later, WeWork filed chapter 11. Based on its share price at filing, WeWork was worth less than $50 million, and SoftBank disclosed that its cumulative loss on the investment had reached $18.6 billion.

Capital Structure and the Restructuring Support Agreement

The first day declaration filed by CEO David Tolley reported total funded debt obligations of approximately $4.219 billion, including about $4.039 billion of secured debt. The capital structure included the prepetition letter of credit facility, approximately $1.012 billion in first-lien notes principal, approximately $733 million of second-lien notes, approximately $200 million of second-lien exchangeable notes, approximately $24.3 million of third-lien notes, approximately $289.1 million of third-lien exchangeable notes, and approximately $170.1 million of 7.875% senior unsecured notes. In early 2023, prior to the filing, WeWork had negotiated Notes Exchange Transactions with a majority of its public noteholders and SoftBank, securing over $1 billion in funding and capital commitments in a last attempt to avoid a chapter 11 filing.

The RSA was signed by WeWork, SoftBank Vision Fund II-2 L.P. and affiliates, Cupar, and an ad hoc group representing approximately 87% of the Series I first-lien notes and second-lien notes. In total, holders of approximately 92% of the company's secured notes supported the agreement. The RSA centered on full equitization of the first-lien notes, second-lien notes, and letter of credit facility claims, with the transaction targeting approximately $3 billion in funded-debt reduction. The restructuring would convert secured debt positions into new equity interests in reorganized WeWork, while cancelling unsecured debt and preexisting equity interests. Up to $100 million of drawn DIP term loan/letter of credit claims would convert to takeback debt under a New 1L Exit Term Loan Facility rather than equitizing. The RSA established specific milestones, including a target plan confirmation date of March 5, 2024, designed to expedite the restructuring process.

SoftBank, which had been the largest creditor and shareholder, committed to providing credit support for a DIP letter of credit facility and a post-emergence exit letter of credit facility. Davis Polk advised the ad hoc group of secured noteholders, and Weil, Gotshal & Manges represented SoftBank throughout the chapter 11 proceedings.

Lease Rationalization and Real Estate Strategy

WeWork's business model depended on long-term commercial leases that it subleased on shorter terms. By the time of filing, the first day declaration described a portfolio with above-market leases that had become unprofitable as remote work reduced demand and discounted sublease inventory entered the market. The company had already been negotiating rent abatements, deferrals, and exits with landlords before the petition date, and the special committee had separately retained Munger, Tolles & Olson LLP as independent counsel and Province, Inc. as independent financial advisor on October 3, 2023 to prepare for the restructuring.

At filing, the debtors sought authority to reject more than 60 unprofitable leases and to use streamlined procedures for additional rejections. On November 29, 2023, Judge Sherwood entered an order approving rejection and assumption procedures that governed lease rejections throughout the case, and separately entered an order approving the initial lease rejections on the same date.

The debtors retained Hilco Real Estate to support an accelerated global lease rationalization effort. According to a cleansing materials filing, WeWork was considering exiting more than 30% of its active, wholly-owned portfolio. By the time of the amended disclosure statement, the debtors had determined a final path forward at 90 percent of the locations in their global real estate portfolio. Specifically, the debtors reached agreements in principle to amend approximately 150 leases, determined to assume or leave in place approximately 150 leases where existing terms supported the go-forward business plan, and determined to reject or negotiate exit of approximately 150 additional leases. Collectively, these lease rationalization efforts resulted in an over $8 billion reduction — more than 40 percent — in total future rent commitments. Multiple landlord groups filed reservations of rights, objections to rejection procedures, and motions to compel assumption or rejection, including disputes with Cushman & Wakefield and several landlord ad hoc groups.

Cash Collateral, DIP Financing, and SoftBank Credit Support

The debtors initially operated on consensual use of approximately $164 million of cash collateral on hand as of the petition date, with adequate protection for prepetition secured parties. WeWork obtained interim approval for cash collateral use at the first day hearing on November 8, 2023.

In January 2024, the debtors and their advisors determined it would be prudent to raise new-money debtor-in-possession financing to carry the debtors through the remainder of the chapter 11 cases. After several months of arm's-length negotiations, the amended disclosure statement described a DIP new-money package and exit facility totaling up to $450 million of new-money financing: up to $50 million available during the chapter 11 cases and up to $400 million committed upon the effective date. The new-money financing was designed to pay allowed administrative claims — estimated at approximately $163 million by May 31, 2024 — including stub rent and deferred postpetition rent obligations, in full in cash, and to leave the business adequately capitalized upon emergence.

SoftBank committed to providing credit support for a DIP letter of credit facility to cover renewal and replacement of certain undrawn prepetition letters of credit. The plan also provided for an Exit LC Facility, structured as a six-year term facility with the SoftBank Parties. On May 30, 2024, Judge Sherwood entered the final DIP order approving the new-money financing, with references to the prior cash collateral order, adequate protection package, carve-outs, and superpriority treatment.

Debt-for-Equity Plan and Creditor Treatment

The third amended plan and confirmation order established the debt-for-equity restructuring. The plan established 13 distinct classes of claims and interests. Five voting impaired classes would receive new equity: Classes 3A and 3B (drawn and undrawn DIP term loan/letter of credit claims), Class 4A (prepetition letter of credit facility claims), Class 4B (first-lien notes claims), and Class 5 (second-lien notes claims). DIP new-money lenders would receive at least 80 percent of the New Interests plus certain premiums, with the remaining creditor classes collectively receiving no more than 20 percent. Up to $100 million of drawn DIP claims would convert to takeback debt rather than equitizing, and rolled undrawn DIP TLC claims would convert into obligations under the Exit LC Facility on a dollar-for-dollar basis.

The amended disclosure statement provided projected recovery estimates for each impaired class. Prepetition LC Facility claims (Class 4A, projected at $421 million) and drawn DIP TLC claims (Class 3A) were projected at 100 percent recovery. First-lien notes claims (Class 4B, projected at $949 million) were projected at approximately 3.5 percent recovery. Second-lien notes claims (Class 5, projected at $1.163 billion) were projected at approximately 4.81 percent. Third-lien notes claims (Class 6, projected at $933 million) were projected at approximately 3.07 percent through participation in the UCC Settlement Trust. Unsecured notes (Class 7, projected at $313 million), general unsecured claims (Class 8, projected between $520 million and $590 million), and parent interests (Class 12) were all projected at zero recovery. A UCC Settlement Trust was established for general unsecured creditors, funded from settlement proceeds and distributed in accordance with the UCC Settlement Trust Documents. The plan eliminated approximately $3 billion of funded debt from the company's balance sheet, and WeWork emerged with what Weil described as a "debt-free balance sheet".

The confirmed plan included discharge, release, exculpation, and injunction provisions under Article VIII, with specific opt-out procedures for third-party releases. Judge Sherwood entered the confirmation order on May 30, 2024, finding that the plan compromises and settlements were fair, equitable, reasonable, and in the best interests of the debtors and their estates. The confirmation order provided that most executory contracts and unexpired leases would be deemed assumed by the reorganized debtors on the effective date, with counterparties given 14 days to object after receiving notice of cure obligations. All compensation and benefits programs were assumed without amendment. A Professional Fee Escrow Account was established, and all final fee applications were required within 45 days after the effective date. Reorganized WeWork emerged as a private company, with New Interests not listed on any public exchange and not subject to SEC reporting requirements. The plan also reserved up to 7 percent of New Interests under a Management Incentive Plan. WeWork filed a notice of effective date on June 11, 2024, and the plan went effective that day, completing the equitization of approximately $3 billion of funded debt.

Key professionals. The debtors retained Kirkland & Ellis LLP as lead counsel (with Cole Schotz P.C. as local co-counsel), PJT Partners LP as investment banker, and Alvarez & Marsal as financial advisor. Hilco Real Estate served as real estate consultant. A special committee of the board retained Munger, Tolles & Olson LLP as independent counsel and Province, Inc. as independent financial advisor. Moelis & Company served as investment banker to the official committee of unsecured creditors. On December 6, 2023, the court entered the ordinary-course professionals order authorizing employment and payment of ordinary-course professionals without requiring separate retention applications. An ad hoc group of holders of 7.875% senior notes filed a motion seeking appointment of an examiner in February 2024, arguing that an investigation was warranted in light of restructuring developments and potential value-allocation questions, though the hearing was adjourned multiple times during the case.

Key Timeline

May 2023	CEO Sandeep Mathrani resigns; Fitch assigns CCC- rating
August 8, 2023	Going concern warning in second-quarter 10-Q
November 2, 2023	S&P declares "selective default" after missed interest payments
November 6, 2023	chapter 11 petitions filed with RSA from 92% of secured noteholders
November 8, 2023	First day hearing; interim cash collateral approval
November 29, 2023	Lease rejection and assumption procedures approved; initial lease rejections ordered
December 6, 2023	Ordinary-course professionals order entered
February 9, 2024	Ad hoc unsecured noteholder group files examiner motion
April 29, 2024	Amended disclosure statement filed
May 30, 2024	Confirmation order and final DIP order entered
June 11, 2024	Plan effective date; WeWork emerges from chapter 11

Frequently Asked Questions

What caused WeWork to file for bankruptcy?

WeWork's filing followed a combination of company-specific and macroeconomic pressures. The company had expanded to more than 700 locations globally, many with above-market lease terms. A failed 2019 IPO, COVID-era office closures, slower-than-expected post-pandemic office returns, rising interest rates, and increased competition from discounted sublease inventory all contributed to an unsustainable cost structure. The company disclosed a going concern warning in August 2023 and entered selective default by November 2023.

What happened to WeWork's debt in the restructuring?

The chapter 11 plan converted first-lien notes, second-lien notes, and letter of credit facility claims into equity in the reorganized company, eliminating approximately $3 billion of funded debt. Third-lien notes, unsecured notes, general unsecured claims, and preexisting equity interests were cancelled and received no distribution. WeWork emerged with a debt-free balance sheet.

Who is the claims agent for WeWork Inc.?

Epiq serves as the claims and noticing agent. The firm maintains the official claims register and distributes case notifications to creditors and parties in interest.

What role did SoftBank play in the restructuring?

SoftBank Vision Fund II-2 L.P. and affiliates were the largest creditor and shareholder heading into the case. SoftBank supported the restructuring support agreement, committed to providing credit support for the DIP letter of credit facility and exit facility, and was represented by Weil, Gotshal & Manges throughout the proceedings.

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