Dietrich Knauth
NEW YORK (Reuters) – Shared office space provider WeWork announced a settlement with its junior creditors and a new cash injection from its senior creditors on Monday, moving toward a bankruptcy deal that rejects a $650 million offer from co-founder and former owner Adam Neumann.
During a hearing in Newark, New Jersey, U.S. Bankruptcy Judge John Sherwood approved the SoftBank-backed New York company’s decision to submit its restructuring plan to a vote of creditors, putting it on track to emerge from bankruptcy by the end of May.
The restructuring, which is now supported by all of WeWork’s major creditors, will transfer the company’s equity to its senior creditors and wipe out $4 billion of its debt.
The revised bankruptcy deal includes up to $450 million in new financing from SoftBank (TYO:), a group of senior noteholders that includes King Street Capital, and Cupar Grimmond, a company affiliated with WeWork technology partner Yardi Systems.
Following the Cupar restructuring, Grimmond will own the majority of WeWork’s equity, with SoftBank holding 16.5%, although SoftBank’s stake could rise to 36% depending on how WeWork decides to supplement some of the separate credit lines it has financed.
Stephen Serajeddini, WeWork’s lawyer, said at Monday’s hearing that the company reached the settlement over the weekend to win support from two factions of junior creditors who had previously opposed its restructuring deal, including a court-appointed committee of creditors and a group of bondholders, including including Antara Capital. In exchange for their support, WeWork agreed to pay $32.5 million to its junior creditors, including $8.5 million to bondholders.
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WeWork used its bankruptcy to negotiate significant reductions in future rental costs with its landlords, ultimately reaching an agreement that saved $8 billion. WeWork canceled leases at about 160 of its 450 locations during the bankruptcy.
Neumann and his new company, Flow Global, claim that WeWork is selling its shares to “selected” insiders instead of trying to get the highest price.
Neumann’s lawyer Sushil Kirpalani said at Monday’s hearing that the $450 million provided by WeWork’s creditors was actually a sale of company stock disguised as a bankruptcy loan. If the company were to be sold, it should partner with Neumann, Kirpalani said.
The judge disagreed, saying WeWork’s secured creditors had the right to reject Neumann’s offer if it was not high enough to pay off the debt they were owed. Sherwood said he would not “prejudicate” a decision by those creditors to receive WeWork shares in exchange for canceling the debt owed to them.
“There may be a certain amount that secured creditors will be able to get paid, but we now know it’s not $650 million,” Sherwood said.
WeWork, once valued at $47 billion, expanded at breakneck speed but suffered huge losses before filing for bankruptcy protection in November 2023. The company estimates its post-bankruptcy equity to be approximately $750 million.