WeWork Gets Court Approval of Key Bankruptcy Deal

WeWork gets court approval for its plan to complete and exit its bankruptcy process by the end of May.

The company announced that it “received court approval of its Disclosure Statement and several additional key motions, paving the way for the company to conclude its financial and operational restructuring and successfully emerge from Chapter 11 by the end of May.”

This includes up to roughly $450 million in new financing, a settlement with junior creditors, senior creditors getting the company’s equity for elimination of all outstanding $4 billion in debt, and the rejection of a $650 million purchase offer from Adam Neumann, co-founder and former chief executive.

“WeWork will immediately begin to solicit votes on the Plan and has requested final approval of the Disclosure Statement and confirmation of the Plan to occur at a hearing now scheduled for May 30, 2024,” the company wrote.

U.S. Bankruptcy Judge John Sherwood signed off on the plan, which enables the necessary creditor vote on acceptance, as Reuters reported.

The additional funding comes from SoftBank and a set of senior bondholders, including Cupar Grimmond, which Bloomberg reports is Yardi’s investment arm, and King Street Capital. The former provided $337 million of the new financing, while a group of other bondholders offered the remaining $112 million.

If the deal is accepted, Yardi, through Cupar Grimmond, would own a “majority” of WeWork’s equity and SoftBank would own 16.5%, a share that could eventually rise to as much as 36%, depending on how some other credit mechanisms are equitized.

A lawyer for WeWork, Steven Serajeddini, said that the company reached settlements with two groups of junior creditors that previously opposed the restructuring proposal. They include a court-appointed creditors committee and a set of bondholders that includes Antara Capital. WeWork agreed to pay $32.5 million to the junior creditors and $8.5 million to the bondholders.

Susheel Kirpalani, an attorney for Neumann, argued that the new credit facility was actually a sale of equity, and so the company should have considered Neumann’s offer, which was higher. Bankruptcy proceedings typically look to maximize revenue for the sake of the creditors.

Reuters reported that Judge Sherwood said secured lenders had the right to reject an offer that was insufficient to cover the owed debt, and $650 million is far less than $4 billion. “There might be a number at which the secured lenders would cash out, but we know now it’s not $650 million,” Reuters quoted Sherwood as saying.