Key Takeaways
- Shared Office space rental company WeWork said it would not pay interest on about $95 million owed Monday, and its shares fell to an all-time low.
- WeWork said it would use its 30-day deadline. debt payment grace period to hold discussions with certain stakeholders and improve its liquidity.
- WeWork warned two months ago that due due to his financial problems, he may not be able to continue his activities.
WeWork (WE) shares collapsed after the shared office rental company said it would miss two interest payments for payment-in-kind (PIK) notes totaling about $95 million which were due Monday.
The company said the money owed included $37.3 million payable in cash and $57.9 million payable in additional PIK notes.
WeWork said it had the necessary liquidity to cover its obligations and that it could do so in the future. However, under the contracts governing the notes, it has a 30-day grace period before non-payment constitutes an “event of default.”
The company said it was using this grace period to “allow discussions to begin with certain stakeholders of the Company's capital structure, while also improving liquidity as the Company continues to take steps to implement its strategic plan.”
As part of this strategic plan, WeWork said it is focused on simplifying its real estate footprint and improving its capital structure.
The news comes two months after WeWork announced that there is “ substantial doubts” as to the continuity of its activity. He highlighted the company's losses and anticipated cash flow needs, as well as increasing member churn and worrying liquidity levels.
To stay in business, WeWork should reduce rents and rental costs, increase revenue, control expenses, limit capital expenditures and “seek additional capital through the issuance of debt, equity securities or asset sales”, the company said at the time.
WeWork shares lost about 14% of their value as of Tuesday's close and traded at an all-time low intraday.
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Source: investopedia.com
