Regus US Files for Chapter 11 Protection

LONDON-The troubled serviced office provider Regus has filed for Chapter 11 bankruptcy protection for its US subsidiary in a bid to buy time to reorganise the American side of the business.

The move, which came after Regus US failed to reach an agreement with landlords in time, will give the company temporary legal protection from creditors while it reorganises its leasehold portfolio. It will also enable Regus to retain key management staff seen as crucial for the future of the business.

Documents filed with the court put consolidated assets in the American operations at £553 million ($887 million) and liabilities at £291.8 million ($468 million). The parent company alone listed total assets of £354.3 million ($568.4 million) and total debts of £17.4 million ($28 million) in its Chapter 11 filing.

With few freeholds in its property portfolio, management is short of options. The chapter 11 filing is the second major move by management to deal with a cash crisis that has engulfed the company as a result of rapid expansion at a time of high rents followed by falling occupier demand. Last December, Regus agreed to sell a 58% stake in its UK business for up to £57 million ($91.4 million).

Regus expects to emerge from bankruptcy protection “well within the 12-month period that is typical for Chapter 11 proceedings” and management has said negotiations with US landlords are already advanced. This means the final settlement should be considerably less than the statutory maximum claim.

Chief executive Mark Dixon said: “Regus is wholly committed to its global strategy, in which the US market is a key component. Our clear objective is to return our US business to profitability and Chapter 11 is now the quickest and most reliable route to secure this.”

The company has also stressed the bankruptcy move in the States will not affect its operations elsewhere in the world.