Sonder In Talks With Creditors As Dwindling Cash Raises Specter Of Bankruptcy
Alternative hospitality company Sonder Holdings is trying to avoid filing for bankruptcy as it struggles to pull itself from a yearslong spiral of losses.
The San Francisco-based firm, which trades on the Nasdaq stock exchange, is pursuing an out-of-court agreement with creditors in an effort to avoid a bankruptcy court-overseen restructuring, Bloomberg reported.
Its shares were down nearly 12% as of early Monday afternoon.
Sonder cited a history of net losses, negative operating cash flows and inability to ensure liquidity to cover obligations as a going concern in a financial filing last week. It had $27M in unrestricted cash at the end of June and lost access to a $35M line of credit in August. The conditions raise “substantial doubt” about the company’s ability to continue, according to the filing.
These concerns come a little over a year after Sonder shuttered about 25% of its short-term rental portfolio, which is largely rooms in boutique hotels and apartments, as it faced class-action securities fraud complaints and said its earlier financial reports were unreliable.
Sonder had almost $1.5B in liabilities and $1B in assets at the end of June. The pursual of an out-of-court agreement with creditors is a last-ditch attempt to avoid a bankruptcy filing, Bloomberg reported, citing unnamed sources.
A media representative for Sonder declined to comment to Bisnow.
Sonder’s portfolio now includes about 8,300 units at 152 properties. The company is working with AlixPartners LLP for operational help and with Moelis & Co. on its financial options, per Bloomberg.
Francis Davidson resigned as Sonder’s CEO and left the board of directors in June.
Launched in 2014, Sonder competes with other STR companies like Airbnb by selling short-term stays in hotels and apartments. Its business model has been to enter long-term leases with apartment and hotel owners, taking up blocks of rooms or whole buildings, then renting those out as short-term rentals on its platform.
In August 2024, two months after closing 3,200 units across 80 locations, Sonder struck a licensing agreement with Marriott to integrate Sonder units into Marriott’s Bonvoy brand. Sonder also announced it secured commitments for $43M in preferred equity at the time.
Sonder is aiming to boost its bottom line through improved operations, including via its integration with Marriott, but “the timing of realization cannot be guaranteed to ensure liquidity is available when needed to meet the Company’s obligations,” Sonder said in its Securities and Exchange Commission filing from Tuesday.
The company also plans to engage a financial adviser, focus on cost optimization and review its lease portfolio to mitigate losses and assess rents.
