Adam Neumann has stepped up his efforts to take back control of WeWork even as the co-working pioneer scrambles to fund hundreds of millions of dollars to avoid going bankrupt and prevent a sale, according to a Financial Times report citing information from two people familiar with the situation.
Since declaring bankruptcy in November, the corporation has made many court-mandated attempts at restructuring, mostly through the renegotiation of hundreds of leases. But according to the insiders, it was low on cash and need as much as $400 million in new capital to have a realistic chance of emerging.
The amount needed is still unknown, but one of the persons said that WeWork would have to sell itself if it couldn't find any more funding.
In 2019, Neumann announced his resignation as CEO of WeWork following an unsuccessful attempt to go public with the firm he co-founded. His recently formed real estate venture, Flow, has already made a conditional bid of roughly $600 million for WeWork.
Attorney Alex Spiro for Flow claimed in a statement to the Financial Times on Wednesday that the company and its financial partners were willing to outbid WeWork on any other offer by ten percent. He said that Flow may complete its due diligence on the deal in two weeks after signing a confidentiality agreement.
WeWork stated in early April that company planned to exit Chapter 11 by the end of May, and a second source familiar with the discussions stated that converting to an auction would be the last resort.
“We are committed to emerging from Chapter 11 next month as a strong and sustainable company, and that is where our undivided attention lies,” a WeWork spokesperson said on Wednesday. “Any new financial investment would serve to further strengthen the company as we exit from bankruptcy.”
The source further stated that WeWork was in talks to raise the money with current lenders, such as SoftBank and Yardi Systems, a real estate technology company that has collaborated with it on a number of initiatives. Yardi has only been mentioned in court documents using the alias "Cupar Grimmond." Yardi did not reply to requests for comment.
Although some prospective purchasers have expressed interest in WeWork without asking, none of them have yet to sign a confidentiality agreement, which is a prerequisite to submitting an official bid.
According to the sources, Rithm Capital and Leonard Blavatnik's Access Industries real estate division have held initial talks with Neumann regarding supporting an acquisition proposal for the company.
Although Rithm refrained from commenting, an Access representative stated that the real estate division was not technically involved at this time. "WeWork is aware of the identities of our top-tier financial institution backers," stated a representative for Neumann's business, Flow.
Although Neumann had previously suggested a $200 million fundraising round, some of the company's largest lenders and advisors are dubious of a return due to his turbulent background as WeWork's CEO.
Spiro further charged in his statement that WeWork was "seeking to rush an insider deal" with a business that WeWork has a close working relationship with.
By terminating approximately 150 leases and renegotiating a similar number, WeWork has reduced its long-term lease obligations by more than $8 billion, leaving only roughly 150 unaffected. According to bankruptcy experts, one way WeWork has achieved this is by refusing to pay post-petition rent, which is a relatively new strategy in bankruptcy. There are still over fifty leases that are outstanding.
Daniel Gielchinsky, a bankruptcy specialist at DGIM who is not engaged in WeWork's proceedings, described the policy of withholding rent as "aggressive, but it was really do-or-die for WeWork." "Landlords who want to work things out to a critical mass exert pressure on other landlords to engage in negotiations as well."
According to court documents, WeWork anticipates having more than 20 million square feet of office space worldwide once it emerges from bankruptcy, as opposed to the 43.9 million square feet it had as of December 2022.
Although the case mostly rests on WeWork's ability to reduce its rent, it also wants to make sure it has enough money to get out of the expensive bankruptcy procedure.
Lease renegotiation has also proven difficult. WeWork has frequently paid out rent that it had previously withheld in agreements it has made with landlords, leaving a financial gap.
The pursuit of funds has created complexities for WeWork's creditors, who possess approximately $4 billion in pre-petition debt. As per their arrangement with the company after its bankruptcy filing, creditors would exchange their bonds and loans for shares in a restructured WeWork.
But, the lenders who give the money it currently requires might seize the majority of the company's worth after it emerges from bankruptcy, making it necessary for current creditors to contribute the additional funding if they wish to save their ownership of the business.
Simultaneously, Neumann and other possible bidders now have an opportunity because of the financial requirements.
“No one wants to put in a new money [loan],” said one lawyer involved in the case.
(Sourec:www.ft.com)
Since declaring bankruptcy in November, the corporation has made many court-mandated attempts at restructuring, mostly through the renegotiation of hundreds of leases. But according to the insiders, it was low on cash and need as much as $400 million in new capital to have a realistic chance of emerging.
The amount needed is still unknown, but one of the persons said that WeWork would have to sell itself if it couldn't find any more funding.
In 2019, Neumann announced his resignation as CEO of WeWork following an unsuccessful attempt to go public with the firm he co-founded. His recently formed real estate venture, Flow, has already made a conditional bid of roughly $600 million for WeWork.
Attorney Alex Spiro for Flow claimed in a statement to the Financial Times on Wednesday that the company and its financial partners were willing to outbid WeWork on any other offer by ten percent. He said that Flow may complete its due diligence on the deal in two weeks after signing a confidentiality agreement.
WeWork stated in early April that company planned to exit Chapter 11 by the end of May, and a second source familiar with the discussions stated that converting to an auction would be the last resort.
“We are committed to emerging from Chapter 11 next month as a strong and sustainable company, and that is where our undivided attention lies,” a WeWork spokesperson said on Wednesday. “Any new financial investment would serve to further strengthen the company as we exit from bankruptcy.”
The source further stated that WeWork was in talks to raise the money with current lenders, such as SoftBank and Yardi Systems, a real estate technology company that has collaborated with it on a number of initiatives. Yardi has only been mentioned in court documents using the alias "Cupar Grimmond." Yardi did not reply to requests for comment.
Although some prospective purchasers have expressed interest in WeWork without asking, none of them have yet to sign a confidentiality agreement, which is a prerequisite to submitting an official bid.
According to the sources, Rithm Capital and Leonard Blavatnik's Access Industries real estate division have held initial talks with Neumann regarding supporting an acquisition proposal for the company.
Although Rithm refrained from commenting, an Access representative stated that the real estate division was not technically involved at this time. "WeWork is aware of the identities of our top-tier financial institution backers," stated a representative for Neumann's business, Flow.
Although Neumann had previously suggested a $200 million fundraising round, some of the company's largest lenders and advisors are dubious of a return due to his turbulent background as WeWork's CEO.
Spiro further charged in his statement that WeWork was "seeking to rush an insider deal" with a business that WeWork has a close working relationship with.
By terminating approximately 150 leases and renegotiating a similar number, WeWork has reduced its long-term lease obligations by more than $8 billion, leaving only roughly 150 unaffected. According to bankruptcy experts, one way WeWork has achieved this is by refusing to pay post-petition rent, which is a relatively new strategy in bankruptcy. There are still over fifty leases that are outstanding.
Daniel Gielchinsky, a bankruptcy specialist at DGIM who is not engaged in WeWork's proceedings, described the policy of withholding rent as "aggressive, but it was really do-or-die for WeWork." "Landlords who want to work things out to a critical mass exert pressure on other landlords to engage in negotiations as well."
According to court documents, WeWork anticipates having more than 20 million square feet of office space worldwide once it emerges from bankruptcy, as opposed to the 43.9 million square feet it had as of December 2022.
Although the case mostly rests on WeWork's ability to reduce its rent, it also wants to make sure it has enough money to get out of the expensive bankruptcy procedure.
Lease renegotiation has also proven difficult. WeWork has frequently paid out rent that it had previously withheld in agreements it has made with landlords, leaving a financial gap.
The pursuit of funds has created complexities for WeWork's creditors, who possess approximately $4 billion in pre-petition debt. As per their arrangement with the company after its bankruptcy filing, creditors would exchange their bonds and loans for shares in a restructured WeWork.
But, the lenders who give the money it currently requires might seize the majority of the company's worth after it emerges from bankruptcy, making it necessary for current creditors to contribute the additional funding if they wish to save their ownership of the business.
Simultaneously, Neumann and other possible bidders now have an opportunity because of the financial requirements.
“No one wants to put in a new money [loan],” said one lawyer involved in the case.
(Sourec:www.ft.com)
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