WeWork, the struggling office space company, said on Friday that was the case reached an agreement with SoftBank and other investors to significantly reduce their debt and secure new financing.
The agreement would cancel or convert about $1.5 billion of the company’s debt into equity, reducing WeWork’s total debt to less than $2.4 billion, the company said. Additionally, the company has until 2027 to repay $1.9 billion of its remaining debt, or two years after that debt is currently due.
The deal culminates in a tumultuous ride for WeWork, which was once viewed by venture capitalists as one of the most valuable and promising startups. Founded by Adam Neumann and backed by SoftBank, the company sought to disrupt the dreary world of commercial real estate by offering short-term leases of trendy office space to large corporations, small businesses and individuals.
But this business model never quite lived up to the grand visions of Mr. Neumann and Masayoshi Son, SoftBank’s founder and top executive. In September 2019, the company refrained from an IPO, Mr. Neumann resigned as CEO, and SoftBank spent billions to keep the company afloat.
The pandemic has dealt another heavy blow, sharply reducing demand for office space. WeWork has spent the last few years cutting costs by renegotiating and terminating leases with commercial landlords and making strides toward becoming a sustainable company. But the company remains unprofitable and heavily indebted.
The transaction, announced Friday, will significantly reduce that debt, add $290 million to WeWork’s cash balance sheet and give the company access to $475 million in new financing commitments. In a statement, WeWork said it was “ideally positioned to capitalize on the tailwinds of the global shift to Flex away from the traditional office.”
WeWork shareholders will be able to vote on the terms of the debt restructuring, and the company will also seek bondholder approval.
After an initial gain following the announcement, the company’s share price closed slightly lower at less than 98 cents on Friday. Its shares were trading at more than $8 at the end of 2021, according to WeWork went public by merging with a special purpose vehicle.
WeWork said it has told the Securities and Exchange Commission that it will delay its annual report because of its debt deal. The company said it aims to submit the report by March 31.
