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WeWork Creditors Brace For Losses As Bankruptcy Looms

Once valued at $47 billion, the firm that set out to re-imagine offices as fun places to work, has been hemorrhaging cash since a botched initial public offering in 2019.

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It reached a sweeping debt restructuring deal at the start of this year, before quickly falling into trouble again. Now, the company has made a restructuring proposal backed by creditors representing roughly 92% of its secured notes, and plans to “streamline” its rental portfolio of office space, it said in a statement.

SoftBank, which has repeatedly invested in the company, stands to lose billions of dollars from the bankruptcy, but will also become a major shareholder in the reorganized firm, with the Japanese conglomerate slated to get three seats on the new board of directors, court papers show.

WeWork hasn’t revealed who currently owns the rest of the debt. Wall Street giants including King Street Capital, Silver Point Capital and BlackRock Inc. backed the March restructuring, according to a regulatory filing, but it’s not clear if they still own the notes.

Holders of WeWork’s credit line, first-lien notes and second-lien notes will swap their debt for stock in the reorganized company, according to court papers. Whether that’s a good deal for creditors largely depends on the company’s success after exiting Chapter 11. Financial firms often buy debt because of the reliability of coupon payments, which will no longer be available.

Holders of third-lien notes, unsecured notes, and general low-ranking claims against the company will likely get little or no recovery. Shareholders will also be wiped out, the court papers show.


Image: WeWork