WeWork Cuts New Restructuring Deal That Spurns Adam Neumann

Jonathan Randles and Steven Church
3 min read
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(Bloomberg) -- WeWork Inc. and its major financial backers including SoftBank Group Corp. 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.

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WeWork has struck an agreement with senior lenders, who have agreed to provide the business with roughly $450 million in Chapter 11 and exit financing in exchange for equity in the reorganized 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 Monday bankruptcy court hearing in New Jersey.

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 Monday’s hearing.

Eli Vonnegut, a lawyer representing a senior lender group backing the deal, said the agreement “is some of the best news we’ve had in this case,” and the company now has a “fast and reliable path out of bankruptcy.” WeWork needs to leave bankruptcy as quickly as possible because the Chapter 11 case has been extremely expensive and administrative costs incurred during the case aren’t sustainable, he said.

The proposal, which lawyers are still documenting, has support from owners of most of WeWork’s $4 billion in senior debt as well as a committee representing the company’s unsecured creditors. The deal leaves out Neumann, who had earlier floated an offer to buy back WeWork for more than $500 million.

Neumann could challenge the proposal, but for his offer, which he values at $650 million, to work, he would need to win support from senior lenders.

WeWork’s advisors have refused to negotiate with him and agreed to the restructuring transaction without public bidding on the firm’s assets, Neumann’s attorney, Susheel Kirpalani, said during the hearing.

‘Economic Interests’

US Bankruptcy Judge John K. Sherwood said it was up to the lenders, who are owed billions of dollars, to decide whether or not to negotiate with Neumann.

“I’m not going to second guess those economic interests,” Sherwood said.

If the restructuring is executed, WeWork would be majority owned by Yardi’s investmnt arm, Cupar Grimmond LLC, which has offered to provide the business with roughly $337 million in financing. A group of WeWork bondholders have also agreed to provide $112 million in financing, Serajeddini said.

SoftBank would still own a portion of WeWork under the new deal. The company would receive at least 16.5% of WeWork at the time it exits Chapter 11 and its share could increase to as much as 36%, depending on how the letters of credit are equitized, 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 reorganization plan. Neumann could still oppose the deal by trying to convince Sherwood to reject the reorganization proposal.

“It’s not over until the money is in the bank,” Sherwood said.

The case is WeWork Inc., 23-19865, U.S. Bankruptcy Court for the District of New Jersey (Newark).

(Adds details on majority owner in fourth, 11th paragraphs.)

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