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WeWork has announced its plan to rid itself of $4 billion in debt while obtaining $450 million in new financing in a bid to get out of chapter 11 bankruptcy.
The company’s plan, which needs to be approved by its creditors, does not involve its founder Adam Neumann, who has launched a bid to buy back the bankrupt commercial real estate firm he founded and was ousted from. It would instead hand a controlling stake in WeWork to the proptech company Yardi.
Neumann has previously offered $600 million to buy back the company, an offer the firm’s creditors have encouraged WeWork to consider. WeWork’s announced plan stands as a rejection of Neumann’s offer to buy back the company.
WeWork’s proposed path out of bankruptcy would involve $337 million from Yardi, who have worked with WeWork for a number of years, and an additional $112 million from bondholders.
“Over the past six months, we have worked extremely hard to develop a plan for a reorganized WeWork that is better capitalized, more operationally efficient, and positioned for continued investment in our products and services and a return to long-term growth,” WeWork CEO David Tolley said in a statement.
The new deal, if approved, would see Yardi’s LLC, Cuper Grimmond, take a 60 percent equity stake in WeWork. A group of lenders would get a 20 percent stake, and longtime WeWork backer SoftBank would get the remaining 20 percent.
Lawyers for Neumann’s new real estate venture, Flow, who had previously signaled the company was willing to outbid other offers by up to 10 percent, signaled a potential legal challenge to the proposal.
“After misleading the court for weeks, WeWork finally admitted it is trying to sell the company to a group led by Yardi for far less than we are continuing to propose, so we anticipate there will be robust objections to confirming this plan,” a lawyer for Flow said in a statement to Commercial Observer.
Neumann founded the firm in 2010 but ultimately led it to its downfall through unsustainable growth, mostly through the nonstop signing of large leases that became unprofitable for the co-working company. He was ousted in 2019 when his erratic behavior and out-of-control spending behavior were made public amid a failed attempt at an initial public offering by the company.
