December 4, 2020

WeWork: SoftBank commits $1.1 billion to WeWork amid membership drop

By Gillian Tan

SoftBank Group Corp. is including $1.1 billion to its WeWork dedication because the co-working firm weathers declining membership amid the coronavirus pandemic, in response to a workers memo obtained by Bloomberg Information.

The brand new financing, “one other signal of SoftBank’s continued assist for our enterprise,” boosts the New York-based firm’s obtainable money and unfunded money commitments to $4.1 billion, in response to Chief Monetary Officer Kimberly Ross’s memo, the contents of which have been confirmed by a spokeswoman. The funding is within the type of senior secured notes.

“Covid-19 has had an affect on our enterprise,” Ross wrote. Whereas WeWork’s second-quarter income rose 9% to $882 million from a yr earlier, that marked a decline from its $1.1 billion haul on this yr’s first three months. The corporate’s membership base fell 12% to 612,000 within the second quarter from that prior interval.

One vibrant spot: “We’ve seen renewed demand from main enterprise firms as they search for flexibility on a worldwide scale,” Ross wrote. The proportion of enterprise members was 48% within the second quarter, a slight improve from the primary.

The corporate has been targeted on whittling prices after its preliminary public providing was shelved final yr. Its money burn — or free money outflow — was $671 million within the quarter, on account of $116 million in non-recurring restructuring bills which included severance linked to layoffs. Nonetheless, the money burn was lower than the $1.three billion in WeWork’s peak outflow within the fourth quarter of 2019, Ross famous.

The agency not too long ago exited leases for would-be areas in Baltimore’s Harbor Level and at 149 Madison Ave. in Manhattan. It has 843 areas in 150 cities throughout 38 international locations.

Changing Dedication
The brand new funding from SoftBank comes after its roughly $100 billion Imaginative and prescient Fund recorded losses after writing down WeWork’s valuation to $2.9 billion, down greater than 90% from its $47 billion peak. SoftBank has invested greater than $10 billion in WeWork.

Final month, We Co., the guardian of WeWork, requested a choose to dismiss a lawsuit introduced by two of its board members towards SoftBank for reneging on a $three billion supply to purchase the co-working firm’s carefully held shares.

The brand new debt financing replaces a $1.1 billion dedication that was conditional on the tender supply agreed to final October, a SoftBank consultant mentioned.

WeWork’s $669 million of seven.875% senior unsecured notes due Could 2025 final traded on Aug. 5 at 70 cents on the greenback, greater than double a low of 35.25 cents on the greenback in March, in response to Hint knowledge.