Co-working giant IWG, which owns shared-office operator Regus, has said it is prepared to place the Jersey-based firm into insolvency unless landlords agree to lower rents.
IWG justified use of the mechanism as 'the Covid-19 pandemic is a black swan event and it has severely impacted our business and presented us with unforeseen challenges', the firm commented.
Simliarly to WeWork, and other flex-office companies, IWG takes office space on long-term leases before subletting to co-working clients. However, as it signs the leases through its smaller subsidiaries, including Regus, the firm has the option of winding up its companies to exit tenancy commitments.
Currently some 15% of the firm's global portfolio is guaranteed by Regus, IWG's largest subsidiary, which The Times estimates as representing some $790 mln (€675 mln) of leases across more than 500 offices. The group has recently shut down a number of small affiliates in the US via Chapter 11 bankruptcy proceedings to reduce its overheads.
At the time of its half year results in August, IWG CEO Mark Dixon said that 'whilst the Covid-19 pandemic continues, we expect our third quarter to be particularly challenging,' adding that the firm would 'remain sharply focused on maximizing further cost savings in the coming months to build on the ($229 mln) of cash savings achieved through the extensive actions already taken'.
Despite warning of 'significant volatility and business disruption', the IWG chief also said that the firm was looking to acquire distressed assets and expand organiically in the coming months.
IWG successfully raised €352 mln through a placing in May, which it suggested at the time would be used for growth activities including M&A.
