Shared office space provider WeWork announced on Monday a settlement with its junior creditors and a new cash infusion from its senior lenders, moving ahead with a bankruptcy deal that rejects a $650 million offer from co-founder and former owner Adam Neumann.
During a hearing in Newark, NJ, US Bankruptcy Judge John Sherwood signed off on the New York-based, SoftBank-backed company sending its restructuring plan to a creditor vote, putting it on track to exit bankruptcy by the end of May.
The restructuring, now supported by all of WeWork’s major creditors, would hand the company’s equity to its senior lenders and cancel its $4 billion in debt.
The revised bankruptcy deal includes up to $450 million in new funding from SoftBank, a group of senior bondholders that includes King Street Capital, and Cupar Grimmond, a company affiliated with WeWork technology partner Yardi Systems.
After the restructuring, Cupar Grimmond would own a majority of WeWork’s equity, and SoftBank would have 16.5%, although SoftBank’s share could rise to as high as 36%, depending on how WeWork decides to equitize some separate credit facilities it has funded.
Steven Serajeddini, a lawyer for WeWork, said at Monday’s hearing that the company reached settlements over the weekend to win the support of two factions of junior creditors that previously opposed its restructuring deal, including a court-appointed creditors committee and a group of bondholders including Antara Capital. In exchange for their support, WeWork agreed to pay $32.5 million to its junior creditors, including $8.5 million to the bondholders.
WeWork used its bankruptcy to negotiate a significant reduction in future rent costs from its landlords, ultimately reaching deals to save $8 billion. WeWork canceled leases at about 160 of its 450 locations during bankruptcy.
Neumann and his new company, Flow Global, have argued that WeWork is selling its equity to “hand-picked” insiders instead of trying to get the highest bid.
Neumann’s attorney Susheel Kirpalani said at Monday’s hearing that the $450 million provided by WeWork’s lenders was really a sale of the company’s equity, disguised as a bankruptcy loan. If the company was for sale, it should have engaged with Neumann, Kirpalani said.
The judge disagreed, saying that WeWork’s secured lenders had the right to reject Neumann’s offer if it was not high enough to buy out the debt they are owed. Sherwood said he would not “second-guess” the decision by those lenders to take WeWork equity in exchange for canceling the debt they are owed.
“There might be a number at which the secured lenders would cash out, but we know now it’s not $650 million,” Sherwood said.
WeWork, once valued at $47 billion, expanded at breakneck speed but racked up steep losses before filing for bankruptcy protection in November 2023. The company estimates that its post-bankruptcy equity is worth about $750 million.
