Bankruptcy pileup: WeWork joins Rite Aid and SmileDirectClub in Chapter 11

A slew of companies that were wobbling when 2023 started have crashed into bankruptcy in recent weeks.

Why it matters: The pileup illustrates the real-world consequences of the end of the free-money era, when lower interest rates made financing a cinch, providing Band-Aids for problems and extending the lives of otherwise flawed operations.

• In the first nine months of 2023, business bankruptcies totaled 17,051, up 30% compared with the same period in 2022, according to the U.S. Courts.

Between the lines: The last several weeks has seen the filings of several major companies, including:

• WeWork, which filed for bankruptcy protection Monday night after a fall from grace that accelerated when the pandemic cratered demand for office space.
• Rite Aid, which faces the threat of liquidation after filing for bankruptcy protection last month.
• SmileDirectClub, whose CFO said "time is of the essence" when the tooth alignment company filed for bankruptcy protection in October as it seeks a deal to continue operating.

Be smart: Each company took its own idiosyncratic path to financial crisis — but each one must now confront the new normal: Obtaining financing or arranging a sale to continue operations is much more challenging than it used to be.

• At SmileDirectClub, for example, advisers contacted more than 60 parties in its quest for financing or a deal beginning in July 2023 but came up with nothing, CFO Troy Crawford said in a court filing.
• The tooth alignment company's "inability to raise any third-party financing" was key to decision to seek restructuring help, Crawford said.

Threat level: Each company is trying to avoid the fate of retailer Bed Bath & Beyond, which liquidated earlier this year after years of failing to adapt to the digital age.

• Unable to find new funding, the chain ended up selling its brand name and website to Overstock.com, whose CEO abruptly stepped down Monday without a replacement.

What's next: WeWork executives have negotiated a debt restructuring plan with secured creditors that may allow the company to emerge as a sustainable company — likely after getting out from under unprofitable leases.

Go deeper: Private equity's looming bankruptcy boom