WeWork backers King Street, SoftBank at odds over restructuring

WEWORK and its creditors are locked in discussions over who will take the keys to the struggling co-working firm as the end of a debt grace period approaches, according to sources with knowledge of the matter.

WeWork’s top backers including SoftBank Group and bondholders including King Street Capital Management are each seeking to take control of the company via a new restructuring after pouring money into the firm, said the sources, who asked not to be identified because the discussions are private. BlackRock and Brigade Capital Management are also part of the negotiations, separate sources familiar with the matter said.

WeWork is seeking to finalise the restructuring deal in the coming weeks, and may execute it as part of a bankruptcy filing as soon as November, the sources said. Terms of the deal have not been finalised and plans may change.

Representatives for WeWork, SoftBank, King Street and BlackRock declined to comment, while Brigade did not respond to requests seeking comment.

In many restructuring scenarios, discussions centre around how much debt a company can support, and therefore which creditors need to swap their debt for equity. SoftBank and the bondholder group have been negotiating how to treat a letter of credit facility SoftBank provided the company in 2020 that has since been amended multiple times, the sources said. WeWork may need access to the facility to help support its short-term financing needs, some of the sources said.

The latest talks follow a rapid downfall for the firm, which has gone from a star startup under flamboyant and charismatic co-founder Adam Neumann to a repeat defaulter. In March, it struck a deal to slash US$1.5 billion of debt in a deal with the King Street led-group and SoftBank.

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A key component of its latest plan calls for the termination and renegotiation of a substantial number of its leases, Bloomberg previously reported. The company is also looking to sharply cut costs such as selling, general and administrative expenses, some of the sources said.

The March deal saw bondholders swap unsecured bonds for new longer-dated notes and inject new money into WeWork. SoftBank also exchanged some of its debt holdings and converted more than US$1 billion of bonds into equity.

WeWork has been operating under a 30-day grace period after it skipped interest payments due earlier this month. The grace period expires Oct 31. BLOOMBERG