WeWork gets $1.1bn funding commitment from SoftBank

The new financing to boost the company’s available cash and unfunded cash commitments to $4.1bn

SoftBank is adding $1.1bn to its WeWork commitment . AFP

SoftBank is adding $1.1 billion (Dh4bn) to its WeWork commitment as the co-working company weathers declining membership amid the coronavirus pandemic, according to a staff memo obtained by Bloomberg News.

The new financing, “another sign of SoftBank’s continued support for our business,” boosts the New York-based company’s available cash and unfunded cash commitments to $4.1bn, according to chief financial officer Kimberly Ross’s memo, the contents of which were confirmed by a spokeswoman. The investment is in the form of senior secured notes.

“Covid-19 has had an impact on our business,” Mr Ross wrote. While WeWork’s second-quarter revenue rose 9 per cent to $882 million from a year earlier, that marked a decline from its $1.1bn haul in this year’s first three months. The company’s membership base fell 12 per cent to 612,000 in the second quarter from that prior period.

“We’ve seen renewed demand from leading enterprise companies as they look for flexibility on a global scale,” Mr Ross wrote. The proportion of enterprise members was 48 per cent in the second quarter, a slight increase from the first.

The company has been focused on whittling costs after its initial public offering was shelved last year. Its cash burn or free cash outflow was $671m in the quarter, due to $116m in non-recurring restructuring expenses which included severance linked to layoffs. Still, the cash burn was less than the $1.3bn in WeWork’s peak outflow in the fourth quarter of 2019, Mr Ross noted.

The firm recently exited leases for would-be locations in Baltimore’s Harbor Point and at 149 Madison Avenue in Manhattan. It has 843 locations in 150 cities across 38 countries.

The new investment from SoftBank comes after its roughly $100bn Vision Fund recorded losses after writing down WeWork’s valuation to $2.9bn, down more than 90 per cent from its $47bn peak. SoftBank has invested more than $10bn in WeWork.

Last month, We Co, the parent of WeWork, asked a judge to dismiss a lawsuit brought by two of its board members against SoftBank for reneging on a $3bn offer to buy the co-working company’s closely held shares.

The new debt financing replaces a $1.1bn commitment that was conditional on the tender offer agreed to last October, a SoftBank representative said.

WeWork’s $669m of 7.875 per cent senior unsecured notes due May 2025 last traded on August 5 at 70 cents on the dollar, more than double a low of 35.25 cents on the dollar in March, according to Trace data.