“I am in the business of solving business problems,” David Tolley said this week, hours after formalising a Chapter 11 bankruptcy filing for WeWork, the company he has been trying to keep afloat for the past six months.
The problems facing him are a legacy of Adam Neumann, the WeWork co-founder who set out to “elevate the world’s consciousness” by overhauling its office space. But WeWork’s first and latest chief executives could scarcely be more different.
Neumann’s style — part entrepreneurial hustler, part charismatic guru — epitomised a type of flamboyant founder who convinced venture investors to put billions of dollars behind their outsized visions in an era of cheap capital. Backed by Masayoshi Son’s SoftBank, Neumann snagged WeWork a private market valuation of $47bn in early 2019, before an unravelling that cost him his job.
Tolley, by contrast, is a clear-eyed financier who spent what he calls his formative years in the unsentimental offices of Morgan Stanley and Blackstone.
Neumann coined the term “community-adjusted ebitda”, a notoriously flattering twist on the common profit measure of earnings before interest, taxes, depreciation and amortisation. Tolley pointedly emphasised “cash ebitda” in recent negotiations with WeWork creditors. The message was that he was not here to play games with bondholders and landlords — and that he expected the same seriousness from them.
“We are using Chapter 11 as an affirmative decision,” he told the Financial Times. WeWork was voluntarily “getting out ahead” of problems caused by $13bn of leases signed in headier times, he argued, and the restructuring would make WeWork “a radically better company tomorrow than it is today”.
A Columbia University MBA, Tolley landed in Morgan Stanley’s telecoms group at a propitious moment, just before president Bill Clinton signed the Telecommunications Act of 1996. That deregulation ushered in a financing and M&A boom that paved the way for broadband internet and the digital economy.
His time at Morgan Stanley, pitching to CEOs and CFOs, was when he started “to learn how they think”, Tolley recalls. But in 2000, he jumped to Blackstone, just as buyout groups began to take on billion-dollar deals.
One of the executives who hired Tolley noted his encyclopedic mastery of the hundreds of wireline and wireless companies sprouting up around the world. A junior colleague from that time recalls that he was noticeably warmer than most partners.
“If there was a criticism of me at Blackstone, [it’s that] I was too nice a guy,” Tolley says: “One reason I am a CEO now rather than a senior guy at Blackstone [is that] I’m better suited for this work.”
He joined a Blackstone infrastructure investing team which spun out into a separate firm in 2011. Tolley, not yet 50, decided to take a break and contemplate retirement.
By 2017, he had decided he had at least one act left. A friend from his Morgan Stanley days got in touch: Alex Clavel, who was running SoftBank’s Vision Fund, asked Tolley to become chief financial officer of a portfolio company, the satellite business OneWeb.
Tolley left after just a year. But when Intelsat, a OneWeb rival, went looking for a finance chief in 2019 he landed the job. “Prior to arriving at Intelsat, I had no idea if I would be a good CEO,” he says, but his time there showed him that “I could bring a thousand people on a journey”.
Intelsat gave him the restructuring experience that secured him his WeWork role. When the satellite group filed for bankruptcy during the pandemic Tolley used the process to sell off spectrum to mobile phone operators willing to pay good prices to build their 5G networks.
It was among the most complex Chapter 11 cases of recent years, featuring subsidiaries with byzantine capital structures and tussles with the likes of billionaire David Tepper. After an almost two-year case, Intelsat emerged with its debt load slashed from $16bn to $7bn.
Tolley, who left when the bankruptcy was complete, combines “a great sense of the big picture” with an ability to stay focused, says Stephen Spengler, the former Intelsat CEO. “He creates a lot of confidence, either with allies or counterparties.”
In February SoftBank, which has poured $16bn into WeWork, helped get Tolley appointed to the office group’s board. His ascent to the top job was rapid. Three months after he joined, then-chief executive Sandeep Mathrani resigned, followed by his CFO and three other directors. Tolley became interim CEO before securing the job permanently last month.
Even though WeWork had improved its liquidity following a complex out-of-court restructuring in March, it was still crippled by spending 70 cents of every dollar of revenue on rent. As chief executive, Tolley challenged landlords to come to the negotiating table or risk having their leases terminated in bankruptcy.
Spreadsheets come easily to Tolley. But he does not share Mathrani’s property industry background and he must still run WeWork’s business while managing the bankruptcy proceedings. Demand for offices remains depressed and, as WeWork lawyers noted in court this week, rivals are circling its customers.
“My job is not to restructure WeWork; it is to repair this company and lead it forward,” Tolley says. With just a hint of his predecessor’s bravado, he adds: “There so much cyclical recovery to go and tailwind at our back and I hope to be here for years to come”.