Greylock Capital Associates, LLC, a New York-based hedge fund founded in 2004, recently filed for chapter 11 protection under subchapter V for small businesses. Assets under management for Greylock have halved since 2017 and the hedge fund has cut its staff from 21 people to just nine now. Greylock filed to reject its $100,000 per month Madison Avenue lease that the hedge fund no longer needs. Greylock leased the 11,400 square foot premises in 2014, but when the fund’s growth stalled after its height in 2017 there was no need for such a large office in the heart of midtown Manhattan.
The debtor opened a smaller office in Stamford, Connecticut, last year to support its commuting employees, further reducing the need for Manhattan office space. In light of changing work-from-home expectations, particularly after the COVID-19 pandemic and the societal responses, Greylock’s sought lease rejection makes sense, even discounting the fund’s reduced assets under management.
Going forward, practitioners will be watching how many New York City firms utilize subchapter V to escape leases entered pre-COVID. Changing expectations regarding employees working from home combined with improvements in communications technology have been pushing firms to reduce physical office space. COVID-19 has only accelerated what was likely an inevitable trend. Whether these firms are distressed or not, a quick stay in bankruptcy to divest one of its most expensive costs may be an attractive option for New York City firms, and smaller hedge funds in particular.
Greylock’s bankruptcy case is In re Greylock Capital Associates, LLC, Case No. 21-22063 (Bankr. S.D.N.Y.).