The once-booming start-up WeWork will file for bankruptcy as early as next week as the company struggles to pay its debts, according to The Wall Street Journal.
WeWork, a company that seeks to provide flexible workspaces that individuals and businesses can rent, could file for Chapter 11 bankruptcy as soon as next week after it missed interest payments to bondholders that were due on Oct. 2, according to the WSJ. The company was once valued at $47 billion, fueled by venture capital funds eager to invest.
The company was given 30 days to make its debt payments after failing to pay interest to bondholders but reached a deal on Tuesday for a seven-day extension so that negotiations could occur before the event of a default, according to the WSJ. The company spent about $530 million out of its reserves in the first half of the year, leaving it with only $205 million in cash as of June to go towards its operating expenses and debts.
WeWork has an estimated $10 billion in current lease obligations on contracts that extend through 2027 while holding 777 locations in 39 countries as of June, with 229 of those locations being in the U.S., according to the WSJ. The company has another $15 billion in lease obligations that begin in 2028.
Bankruptcies have begun to rise in the U.S. for the first time in 13 years, with personal bankruptcies up 18% year-over-year in August. The bankruptcies follow high-interest rates and falling real wages due to high inflation.
The Federal Reserve has raised its federal funds rate to a range of 5.25% and 5.50% after a series of 11 rate hikes that started in March 2022, which have placed upward pressure on interest rates on all forms of debt. Inflation has continued to remain elevated above the Fed’s 2% target despite the high rates, with the Consumer Price Index increasing 3.7% year-over-year in both September and August.
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