The Kroll analysts warn that although IWG has sought to extract rent deferrals and lease modifications from its landlords, the bankruptcy filing means the company can walk away from its rental obligations. IWG tends to sign leases and file bankruptcy petitions through single-purpose limited liability companies. That means that part of its portfolio can enter bankruptcy and tear into landlords without impacting other locations.
In the UK, the company has threatened to plunge Jersey-based Regus plc into insolvency. As a result, up to £790 million of lease guarantees could be dissolved, leaving landlords in the lurch. The only way for the landlords to avoid such a dire outcome, IWG says, is to agree to sharp rent cuts across 500 centers.
Unlike WeWork, IWG made a profit last year. But in the first half, IWG booked a pre-tax loss of £176 million, compared to the £145 million profit in first half of 2019. IWG has already warned that it expects to lose substantially more in the second half, despite slashing costs by £300 million. Its shares are currently down 43% year-to-date.WeWork Forerunner IWG/Regus Restructures its Business, Unleashing Mayhem on Landlords and Investors | Wolf Street