WeWork wins bankruptcy plan approval

BY Richard Summerfield

Shared office provider WeWork has won the approval of a US bankruptcy judge for its Chapter 11 bankruptcy plan, enabling the company to eliminate $4bn of debt and handing control over to a group of lenders and real estate tech firm Yardi Systems.

The company, which was founded in 2010 and was once trumpeted as the future of the office, amassed considerable losses during a period of aggressive global expansion prior to the COVID-19 pandemic. However, as demand for office space fell dramatically during the pandemic and in the immediate aftermath, the company was forced to file for bankruptcy protection in November 2023.

The plan, which was approved in a New Jersey bankruptcy court last week, will eliminate $4bn of the firm’s debt and reduce future rent obligations by $12bn, according to the company. WeWork expects to complete the restructuring by mid-June, noting that it was now positioned for “sustainable, profitable growth”, raising the prospect of it breaking even after years of steep losses.

Going forward, WeWork plans to operate 337 shared office spaces globally, around half the number of sites it had around a year ago. The US and Canada will remain its biggest market, with more than 170 locations. Yardi Systems is taking a majority stake in exchange for providing $450m in financing along with other investors. Japan’s SoftBank Group also remains a backer.

“Due to the tireless efforts of our team, and the unwavering loyalty of so many of our members, we have completed our Chapter 11 proceedings with success well beyond our initial expectations,” said David Tolley, chief executive of WeWork. “In one of the largest and most complex restructurings, we have achieved extraordinary outcomes. Over the last year, we have also seen strong demand across the WeWork system and increased our member net promoter scores. Each of these achievements represents an exceptional testament to our people, our brand and our industry-leading service offerings.”

Prior to the plan’s approval, Adam Neumann, co-founder and former-chief executive of WeWork, confirmed he was no longer attempting to acquire the business. Mr Neumann stepped down from WeWork in 2019 after its initial failure to go public, and following criticism of the firm’s internal culture. He had reportedly offered $500m for the company but declined to move forward with his bid, noting that he did not think WeWork’s plan was viable in the long term.

News: US court approves WeWork bankruptcy exit

Red Lobster files for Chapter 11

BY Fraser Tennant

With debts of approximately $294m, US-based restaurant chain Red Lobster, along with its direct and indirect operating subsidiaries, has filed for Chapter 11 bankruptcy protection.

The company intends to use the bankruptcy proceedings to drive operational improvements, simplify the business through a reduction in locations, and pursue a sale of substantially all of its assets as a going concern.

In addition, the company has been working with vendors to ensure that operations are unaffected and has received a $100m debtor-in-possession financing commitment from its existing lenders.

As part of the Chapter 11 filing, Red Lobster has entered into a stalking horse purchase agreement pursuant to which Red Lobster will sell its business to an entity formed and controlled by its existing term lenders.

“This restructuring is the best path forward for Red Lobster,” said Jonathan Tibus, chief executive of Red Lobster. “It allows us to address several financial and operational challenges and emerge stronger and refocused on our growth.”

The company has also stated that while its restaurants will remain open and operating as usual during the Chapter 11 process, some underperforming restaurants will be closed and sold to a group of its lenders, which includes Fortress Investment Group.

Concurrent with the Chapter 11 process, court documents reveal that Red Lobster is investigating the role its majority owner, Thai Union, played in the restaurant chain’s ‘endless shrimp’ promotion that caused $11m in losses.

Red Lobster has said that the failed promotion was part of a pattern of mismanagement by the global seafood company that owns most of its equity and supplies shrimp to its restaurants.

Founded in 1968 and headquartered in Orlando, Florida, Red Lobster’s is focused on serving the highest quality, freshly prepared seafood that is traceable, sustainable and responsibly sourced. The company has around 550 casual dining restaurants in the US.

Mr Tibus added: “The support we’ve received from our lenders and vendors will help ensure that we can complete the sale process quickly and efficiently while remaining focused on our employees and guests.”

News: Red Lobster probes “endless shrimp” losses after bankruptcy filing

Steward files for Chapter 11 to support restructuring

 BY Fraser Tennant

In what has been described as the biggest hospital bankruptcy in decades, healthcare provider Steward Health Care has filed for Chapter 11 bankruptcy protection. 

Among the factors driving the filing are insufficient reimbursement by government payors as a result of decreasing reimbursement rates, skyrocketing labour costs, increased material and operational costs due to inflation, and the continued impacts of the coronavirus (COVID-19) pandemic.

The company intends to resolve the Chapter 11 process as quickly as possible, with the help of the court, with a view toward the long term, sustainable financial health of the system.

“Steward Health Care has done everything in its power to operate successfully in a highly challenging healthcare environment,” said Ralph de la Torre, chief executive of Steward. “Filing for Chapter 11 restructuring is in the best interests of our patients, physicians, employees and communities at this time.”

In addition, Steward is finalising the terms of debtor-in-possession financing from Medical Properties Trust for initial funding of $75m and up to an additional $225m upon the satisfaction of certain conditions acceptable to Medical Properties Trust.

“With the additional financing in this process, we are confident that we will keep hospitals open, supplied, and operating so that our care of our patients and our employees is maintained,” continued Mr de la Torre. “By working collaboratively with stakeholders in this court-supervised controlled environment, and having the benefit of our earlier strategic efforts.”

Based in Dallas, Steward currently operates more than 30 hospitals across Arizona, Arkansas, Florida, Louisiana, Massachusetts, Ohio, Pennsylvania and Texas. It is the US’ largest physician-led, minority-owned, integrated healthcare system.

The company does not expect any interruptions in its day to day operations, which will continue in the ordinary course throughout the Chapter 11 process. Steward’s hospitals, medical centres and physician’s offices are open and continuing to serve patients and the broader community.  

Mr de la Torre added: “Steward will be better positioned to responsibly transition ownership of its Massachusetts-based hospitals, keep all of its hospitals open to treat patients, and ensure the continued care and service of our patients and our communities.”

News: US hospital network Steward files for bankruptcy, aims for new loan

Express Inc files for Chapter 11 bankruptcy protection

BY Richard Summerfield

Clothing retailer Express Inc has filed for Chapter 11 bankruptcy protection and announced its intention to close more than 100 retail locations across its portfolio of brands

According to the filing with the bankruptcy court in Delaware, Express has assets and liabilities in the range of $1bn to $10bn.

The company has a stable of brands including Express, Bonobos and UpWest Express. According to its website, Express operates around 530 Express retail and Express Factory Outlet stores in the US and Puerto Rico and around 12 UpWest retail stores, in addition to online operations for these brands.

In a statement announcing the filing, Express noted that it filed for bankruptcy to “facilitate” a sale process of most of its retail stores and operations to the investor group, which includes WHP, Simon Property Group and Brookfield Properties. The company received a nonbinding letter of intent from the investors to buy the assets and has also secured $35m in new financing from some of its existing lenders, subject to court approval. Express also secured $49m in cash from the IRS related to the CARES Act – a critical influx of liquidity that the company had been waiting on to shore up its balance sheet.

The company also named Mark Still as its new chief financial officer (CFO), effective immediately. Mr Still had served as interim CFO since November 2023.

“We continue to make meaningful progress refining our product assortments, driving demand, connecting with customers and strengthening our operations,” said Stewart Glendinning, chief executive of Express. “We are taking an important step that will strengthen our financial position and enable Express to continue advancing our business initiatives. WHP has been a strong partner to the Company since 2023, and the proposed transaction will provide us additional financial resources, better position the business for profitable growth and maximize value for our stakeholders.

“Express has a strong portfolio of brands and a premier omnichannel platform,” he continued. “Our top priority remains providing our customers with the contemporary styles and value they expect from us. We thank our associates for their continued hard work and commitment, and we appreciate the ongoing support of our vendors, suppliers and business partners.”

Express, which was founded in 1980 by Les Wexner’s Limited Brands, has endured a difficult few years. Its sales have plummeted while debt and costly leases dragged down its business.

News: Apparel retailer Express files for US bankruptcy protection, to close over 100 stores

99 Cents Only files for Chapter 11

BY Fraser Tennant

Citing inflationary pressures that made its business model unsustainable, budget retailer 99 Cents Only has filed for Chapter 11 bankruptcy.

99 Cents Only Stores, together with its financial and legal advisers, engaged in an extensive analysis of all available and credible alternatives to identify a solution that would allow the business to continue.

Following months of actively pursuing these alternatives, the company ultimately determined that an orderly wind-down was necessary and the best way to maximise the value of 99 Cents Only Stores’ real estate and other assets.

To that end, the company has secured $60.8m in senior secured super priority debtor in possession financing consisting of $35.5m in new money to be provided by an entity affiliated with certain of the company's existing stakeholders, subject to court approval.

To date, all 99 Cents Only Stores remain open, and the company has commenced going out of business sales at all 371 store locations, offering customers significantly reduced prices on a wide range of products. The company has also filed customary motions with the bankruptcy court to support its operations through the wind-down process, including payment of employee wages.

“This was an extremely difficult decision and is not the outcome we expected or hoped to achieve,” said Mike Simoncic, interim chief executive of 99 Cents Only Stores. “Unfortunately, the last several years have presented significant and lasting challenges in the retail environment, including the unprecedented impact of the pandemic, shifting consumer demand, rising levels of shrink, persistent inflationary pressures and other macroeconomic headwinds, all of which have greatly hindered the company’s ability to operate.”

To help facilitate the wind-down, the company has appointed Chris Wells, managing director at Alvarez & Marsal, as chief restructuring officer, with Mr Simoncic stepping down.

Founded in 1982, 99 Cents Only Stores LLC currently operates nearly 371 stores located in California, Texas, Arizona and Nevada. It offers a broad assortment of name brand and other attractively priced merchandise as well as compelling seasonal product offerings.

Mr Simonic concluded: “We deeply appreciate the dedicated employees, customers, partners and communities who have collectively supported 99 Cents Only Stores for decades.”

News: Retailer 99 Cents Only files for bankruptcy, plans to shut down