NEW YORK – WeWork and its major financial backers, including SoftBank Group, have struck a new restructuring deal to get the ailing workspace provider out of bankruptcy, spurning a competing financing proposal from co-founder Adam Neumann.
WeWork has struck an agreement with senior lenders, who have agreed to provide the business with roughly US$450 million (S$612.4 million) in Chapter 11 and exit financing in exchange for equity in the reorganised business.
SoftBank and other owners of the company’s existing letters of credit could also swap their debt holdings for stock after exiting Chapter 11, WeWork lawyer Steven N. Serajeddini said during a bankruptcy court hearing in New Jersey on April 29.
The restructuring deal represents a major milestone for the company after it filed for bankruptcy in November. If approved by the court, the business will be on a path to exit court protection in the coming months with less debt and a leaner, less expensive lease portfolio.
WeWork would be majority-owned by Yardi, a provider of software for commercial and residential property owners, according to lawyers and a company statement issued after the April 29 hearing.
The proposal, which lawyers are still documenting, has support from owners of most of WeWork’s US$4 billion in senior debt and a committee representing the company’s unsecured creditors.
The deal leaves out Mr Neumann, who had earlier floated an offer to buy back WeWork for more than US$500 million.
Mr Neumann could challenge the proposal, but for his offer, which he values at US$650 million, to work, he would need to win support from senior lenders.
WeWork’s advisers have refused to negotiate with him and agreed to the restructuring transaction without public bidding on the firm’s assets, Mr Susheel Kirpalani, Mr Neumann’s attorney, said during the hearing.
US bankruptcy judge John K. Sherwood said it was up to the lenders, who are owed billions of US dollars, to decide whether to negotiate with Mr Neumann.
“I’m not going to second-guess those economic interests,” Judge Sherwood said.
If the restructuring is executed, WeWork would be majority-owned by Yardi’s investment arm, Cupar Grimmond, which has offered to provide the business with about US$337 million in financing.
A group of WeWork bond holders have also agreed to provide US$112 million in financing, Mr Serajeddini said.
SoftBank would still own a portion of WeWork under the new deal. The company would receive at least 16.5 per cent of WeWork at the time it exits Chapter 11 and its share could increase to as much as 36 per cent, depending on how the letters of credit are equitised, lawyers said.
In the coming weeks, WeWork must put the proposed deal into a final contract and ask creditors to vote on the company’s broader reorganisation plan.
Mr Neumann could still oppose the deal by trying to convince Judge Sherwood to reject the reorganisation proposal.
“It’s not over until the money is in the bank,” Judge Sherwood said. BLOOMBERG
