SoftBank has agreed to lend $ 1.1 billion to WeWork to help detect coronavirus-related disruptions, on top of the more than $ 10 billion it has already invested in the release property group, according to a memo that was sent by WeWork’s chief financial officer to employees on Thursday.
WeWork has not yet tapped the $ 1.1 billion funding, which is structured as a senior secured debt, two people said informed of the matter. WeWork would have 12 months to repay the loan, the people added.
The new money would help the company handle large cash outflows in the second quarter, according to CFO Kimberly Ross’ memo. The loan raises the company’s cash and unfunded cash liabilities to $ 4.1bn at the end of June, up from $ 3.9bn at the end of March.
Ms Ross told creditors and investors separately at a conference call on Thursday that the company did not immediately expect to need the $ 1.1 billion, but that it was nice to have the liquidity available, said one person who heard the call .
The staff meeting revealed that WeWork burned $ 671 million in the three months to the end of June, almost 40 percent up from the quarter before. The figure included $ 116 million in restructuring costs such as compensation to laid-off employees. The company did not report its net loss in the memo.
WeWork also revealed on Thursday that sales fell by roughly one-fifth of the first quarter to $ 882 million and that its membership – which spans freelancers to Fortune 500 companies – fell 12 percent from 693,000 to 612,000 in the second quarter of the three months before.
‘Although turnover is declining [the first quarter] due to Covid-19-related business disruptions, our overall financial foundation and our sales pipeline remain stronger, “Ms. Ross wrote.
Large corporate clients have come to make up a larger portion of WeWork’s membership base since the coronavirus crisis unfolded, ending June for 48 percent of its members.
The company has dramatically slowed down its expansion following SoftBank, with the majority of the buildings it opened in 2020 stemming from lease agreements it had signed in previous years. Ms Ross noted that the company ended the quarter with 843 locations, up by just 15 buildings by the end of March.
In the first quarter, however, the building count swelled by 89 locations. WeWork has closed underperforming buildings and abandoned some leases because it has cut costs. It has also scrapped its workforce from a high of 14,000 in 2019 to 5,600.
SoftBank’s new financing is in line with a $ 1.1 billion loan that was agreed last year but fell apart in April. That agreement was predicted to complete a tender offer in which SoftBank would buy $ 3 billion of WeWork shares from existing investors, but the Japanese group telecom-to-technology never agreed to it.
WeWork, SoftBank and a group of investors are locked in lawsuits over the deal.
WeWork’s publicly traded $ 669m of debt changed hands at 70.5 cents on the dollar on Thursday, according to the Financial Industry Regulatory Authority. While the band more than doubled in value from a low hit in March, it is still sharply below levels just before the pandemic hit U.S. financial markets.
