Knotel Announces Path Forward to Rightsize Business

Rhea-AI Summary

Knotel has announced a strategic transformation plan under new ownership, agreeing to sell its business to Newmark Group (NMRK) while reorganizing its operations via Chapter 11 bankruptcy. The company is set to exit several U.S. locations and has secured approximately $20 million in debtor-in-possession financing to support its operations during this transition. Knotel aims to maximize stakeholder value amidst challenging market conditions, particularly in key areas like New York and San Francisco, and is focused on sustainable growth in the flexible workspace market.

Positive

• Newmark Group's acquisition could strengthen Knotel's operational capabilities.
• Secured $20 million in DIP financing to support ongoing operations.

Negative

• Filing for Chapter 11 bankruptcy indicates significant financial distress.
• Exiting multiple U.S. locations may affect market presence and revenue.

NEW YORK, Jan. 31, 2021 /PRNewswire/ -- Knotel, Inc. (or the "Company") today announced plans to accelerate its transformation into a more capital efficient business and reorganize its operations and capital structure under new ownership.

As part of its strategic path forward, Knotel has reached an agreement to sell the business to an affiliate of Newmark Group, Inc. (Nasdaq: NMRK) ("Newmark"), a leading full-service commercial real estate firm. The Company has also made the decision to exit multiple locations in the U.S. as part of the process. 

To accomplish the sale of the business and a reorganization of the Company's U.S. footprint in the most efficient manner, Knotel and its U.S. subsidiaries have filed voluntary petitions for relief under Chapter 11 of the U.S. Bankruptcy Code in the United States Bankruptcy Court for the District of Delaware (the "Court"). The filing does not include Knotel's international operations.

Knotel has obtained a commitment for debtor-in-possession ("DIP") financing from an affiliate of Newmark of approximately $20 million in cash. Subject to Court approval, Knotel believes this DIP financing will provide sufficient liquidity to support Knotel's day-to-day operations during the process, including timely payment of employee wages and continuation of benefits, as well as working with customers and vendors.

Amol Sarva, Knotel Co-founder and Chief Executive Officer, said, "After a thorough review of strategic alternatives, we have determined that a process to sell our business and reshape our U.S. footprint is the best path forward to maximize value for our stakeholders. The pandemic created a uniquely challenging operating environment, with significant impacts on leasing velocity and the rate of renewals in key markets, particularly New York and San Francisco. We must address this now to position our business for sustainable growth and a successful future."

"Our restructuring will enable us to strengthen our balance sheet, focus on a rightsized portfolio of locations, and maintain relationships with our customer base while continuing to build on Knotel's differentiated service offering. We continue to believe in Knotel's potential in the growing flex market. We thank our talented team members for their continued hard work and dedication toward fulfilling our vision of tailoring flexible workspaces on a global scale so companies and their people are empowered to do their best work," Dr. Sarva added.

"We look forward to supporting Knotel through this transitional period," said Newmark Chief Executive Officer Barry Gosin. "We are providing capital to Knotel so it can rightsize its business for the path forward."

To ensure a smooth transition into Chapter 11, the Company filed with the Court a series of customary "first day" motions, including requests to continue to pay wages and provide health and insurance benefits to employees in the normal course.

The Company also filed a motion requesting approval of a stalking horse asset purchase agreement with Newmark and to initiate a process under Section 363 of the Bankruptcy Code.

Additional information about the Knotel Chapter 11 proceeding, including access to Court documents, can be found at https://cases.omniagentsolutions.com/knotel. Stakeholders with questions can call (866) 771-0565 (U.S. and Canada) or (818) 581-2989 (international) or email KnotelInquiries@OmniAgnt.com.

Milbank LLP and Fenwick & West LLP are serving as legal counsel and Moelis & Company LLC is serving as investment banker to Knotel.

About Knotel
Knotel operates a leading flexible workspace platform that matches, tailors, and manages space for customers. Founded in 2016 to give businesses the flexibility and speed to scale on their own terms, Knotel caters to established and growing companies, giving them the freedom to focus on their business, culture, and people. All Knotel spaces are tailored to the needs of each individual company by an in-house team of architects, interior designers, and workplace strategists. For more information, please visit www.Knotel.com.

Media Contacts:
Mousa Ackall
Director of Marketing
mackall@knotel.com
(678) 662-7371

Jeremy Fielding / Sherri L. Toub / Ross Lovern
Kekst CNC
jeremy.fielding@kekstcnc.com / sherri.toub@kekstcnc.com / ross.lovern@kekstcnc.com
(212) 521-4800

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SOURCE Knotel, Inc.

FAQ

What is Knotel's recent announcement regarding its business operations?

Knotel announced plans to sell its business to Newmark Group and restructure its operations through Chapter 11 bankruptcy.

How much financing has Knotel obtained to support its operations?

Knotel has secured approximately $20 million in debtor-in-possession financing from Newmark.

What challenges is Knotel facing in its operational strategy?

Knotel is addressing significant impacts from the pandemic on leasing velocity and renewal rates, particularly in New York and San Francisco.

How does Knotel's bankruptcy filing affect its business model?

The Chapter 11 filing reflects financial distress and involves exiting multiple U.S. locations to streamline its operations.

What did Knotel's CEO state about the company's future?

Knotel's CEO emphasized the goal of maximizing stakeholder value and positioning the company for sustainable growth in the flexible workspace market.