WeWork secured $2.5b bailout in 2019 but how will 2020 & beyond play out?

WeWork secured $2.5b bailout in 2019 but how will 2020 & beyond play out?

In December 2019 we reported that WeWork secured $US1.75 billion ($AUD2.56 billion) in new financing in a fundraising push led by Goldman Sachs.

The new line of credit is the first hurdle cleared by SoftBank in its pledge to put together $US5 billion in debt financing for WeWork as part of a bailout package. The move should free up roughly $US800 million in cash that WeWork had set aside to satisfy covenants on its previous credit line, notes Bloomberg.

“We are pleased that WeWork and SoftBank Group Corp. have entered into a commitment letter with Goldman Sachs,” Erin Clark, a spokeswoman for WeWork, said in a statement.

WeWork won’t be required to post any cash collateral under the new deal, she said.

“WeWork and Softbank are co-obligors on a senior-secured and unsecured basis, respectively.”

WeWork will be able to access the facility starting next month, Clark said.

Goldman Sachs has reached out to other banks to gauge their interest in participating in the facility, structured as letters of credit, with the goal of putting it in place before the end of the year. The new credit line will replace existing facilities that total about $US1.1 billion.

Bonds that WeWork issued last year to help fund its expansion have climbed more than US10¢ this month to US81.75¢ on the dollar, according to Trace pricing data.

Once the facility is in place, a $US3.3 billion debt package will be arranged to complete the SoftBank plan. It’s not yet clear which banks will lead the second part of the debt financing. SoftBank has previously said the $US3.3 billion will include $US1.1 billion of senior secured notes and $US2.2 billion in unsecured notes.

WeWork has recently struggled to get office leasing deals over the line in Australia, in a sign that its woes are starting to hit Australia’s shores.

In addition to raising capital, WeWork has also announced that it will be laying off 4,000 jobs worldwide — part of an aggressive turnaround plan by Softbank.

How will WeWork and similar businesses reshape their business models for the post COVID-19 world if they want to survive.