Shared office space provider WeWork on Monday announced a settlement with junior creditors and an infusion of new capital from senior lenders, rejecting a $650 million offer from co-founder and former owner Adam Neumann. proceeded with a bankruptcy transaction.
At a hearing in Newark, New Jersey, U.S. Bankruptcy Judge John Sherwood said the New York-based, SoftBank-backed company will submit a reorganization plan to a creditor vote and emerge from bankruptcy by the end of May. I signed on to get it back on track.
The restructuring, which currently has the support of all of WeWork’s major creditors, will transfer the company’s stock to senior lenders and cancel $4 billion in debt.
The amended bankruptcy agreement includes up to $450 million from SoftBank, a senior bondholder group that includes King Street Capital, and Cooper Grimond, a company owned by WeWork’s technology partner Yardi Systems. Includes new funding.
After the reorganization, Cooper Grimmond will own a majority stake in WeWork, with SoftBank owning 16.5%, but how will some of the individual credit lines funded by WeWork be converted into equity? Depending on the situation, SoftBank’s share could rise to as much as 36%.
WeWork lawyer Stephen Serajedini said at Monday’s hearing that the company is working with junior creditors who have previously opposed the company’s restructuring agreement, including a court-appointed creditors committee and a group of bondholders. said a settlement was reached over the weekend in favor of the two factions. Antara capital. In exchange for their assistance, WeWork agreed to pay $32.5 million to junior creditors, including $8.5 million to bondholders.
WeWork used bankruptcy to negotiate significant reductions in future rent with landlords, ultimately reaching a deal that saved it $8 billion. WeWork terminated leases on about 160 of its 450 locations when it filed for bankruptcy.
Mr. Neumann and his new company, Flo Global, argued that WeWork was not trying to get the highest bid, but instead was selling shares to “hand-picked” insiders.
Mr. Newman’s lawyer, Susheel Kirpalani, said at Monday’s hearing that the $450 million provided by WeWork’s lenders was actually a sale of company stock disguised as a bankruptcy loan. If the company had been for sale, Mr. Kirpalani said, he should have signed Mr. Neumann.
The judge disagreed, saying WeWork’s lenders had the right to reject Mr. Neumann’s offer if it wasn’t high enough to buy out the debt. “I’m not going to second-guess” the lenders’ decision to acquire WeWork stock in exchange for canceling the debt, Sherwood said.
“There may be an amount that the secured lenders can cash out, but we know right now it’s not $650 million,” Sherwood said.
Once valued at $47 billion, WeWork expanded at breakneck speed but racked up massive losses before filing for bankruptcy protection in November 2023. The company estimates its post-bankruptcy equity to be worth approximately $750 million.
