WeWork rival IWG has a growing debt problem

People use laptops in a Spaces office workspace, an IWG brand, in London, Britain December 1, 2021. REUTERS/May James

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LONDON, Aug 9 (Reuters Breakingviews) – IWG’s (IWG.L) business model looks a bit fragile. Shares of $2 billion rival WeWork (WE.N) fell 10% on Tuesday after the loss-making firm said inflationary pressures, war in Ukraine and shutdowns of markets like China had caused the market to stagnate. operating profit at a negative 2.2 worse than expected. million pounds in the first half. This is despite leasing activity and margins rising post-pandemic.

Debt is another challenge for the eternal candidate for recovery. In the six months to June 30, IWG’s net debt rose 6% to almost £7.2 billion, more than 5.5 times the company’s revenue. The danger for CEO and founder Mark Dixon is that stubbornly high inflation will erode some of the benefits of his cost-cutting program as the cost of servicing the company’s debt continues to rise. And, as key markets like the US and UK head into a downturn, IWG’s model of offering tenants short-term contracts will be vulnerable as businesses seek to cut costs. A strained balance sheet will make it harder for Dixon to reap the promised benefits of the post-pandemic shift to hybrid working. (By Aimee Donnellan)

(The author is a Reuters Breakingviews columnist. Opinions expressed are their own. Updates to add related links.)

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Editing by Neil Unmack and Pranav Kiran

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