Troubled office space company WeWork said on Friday that it has reached an agreement Working with SoftBank and other investors to significantly reduce its debt and secure new financing.
The agreement will 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 will pay down $1.9 billion of its remaining debt by 2027, or two years later than it is currently maturing.
The deal caps a tumultuous journey for WeWork, once considered by venture capitalists to be one of the most valuable and promising start-ups. Founded by Adam Neumann and backed by SoftBank, the firm aims to change the humdrum world of commercial real estate by leasing trendy office space short-term to big corporations, small businesses and individuals.
But the business model never fully realized the grand vision of Mr. Neumann and SoftBank founder and executive Masayoshi Son. In September 2019, the company called off its initial public offering, Mr. Neumann stepped down as CEO and SoftBank spent billions of dollars to keep the company afloat.
The pandemic has dealt another blow, drastically reducing the need for office space. WeWork has been cutting costs over the past few years by renegotiating and terminating leases with commercial landlords, making progress toward becoming a sustainable business. But the company remains unprofitable and saddled with massive debt.
The deal announced Friday will significantly reduce debt, boost WeWork’s balance sheet by $290 million in cash and give the company $475 million in new financing commitments. In a statement, WeWork said it was “ideally positioned to capture the tailwinds of the global shift from traditional to flexible offices.”
WeWork shareholders will vote on the terms of the debt restructuring, and the company will also seek approval from bondholders.
The company’s shares were flat on Friday, hovering near $1. After WeWork went public through a merger with a special purpose acquisition company, its stock price will exceed $8 in late 2021.
WeWork said it has notified the SEC that it will delay filing its annual report because of the debt deal. The company said it aims to file the report by March 31.
