The funding will give WeWork with “significant liquidity to execute its business plan to accelerate the Company's path to profitability and positive free cash flow," SoftBank had said in October announcing the new financing package.
Beleaguered coworking company WeWork said it has arranged a $1.75 billion letter of credit with Goldman Sachs. The letter, said WeWork on Tuesday, is currently being syndicated and the funds are likely to be available in January 2020. “We are pleased that WeWork and SoftBank Group Corp have entered into a commitment letter with Goldman Sachs for a new $1.75 billion senior secured letter of credit facility,” said a statement by WeWork. The facility is in the process of syndication and is expected to be available in January, the company added. The credit facility is part of SoftBank’s $9.5 billion bailout package for WeWork in exchange for reportedly 80 per cent stake in the co-working company.
SoftBank had announced the finance package in October after WeWork delayed its IPO plans. The package included “$5 billion in new financing and the launching of a tender offer by SoftBank of up to $3 billion for existing shareholders. Additionally, SoftBank will be accelerating an existing commitment to fund $1.5 billion,” Softbank had said in a statement. The funding will give WeWork with “significant liquidity to execute its business plan to accelerate the Company’s path to profitability and positive free cash flow.” The $5 billion new debt consisted of $1.1 billion in senior secured notes, $2.2 billion in unsecured notes, and a $1.75 billion letter of credit facility.
WeWork is required to post 0 per cent cash collateral and the company along with Softbank are co-obligors on a senior secured and unsecured basis, respectively, the statement added. The company’s valuation had shot up from earlier $20 billion after SoftBank poured $3 billion and $2 billion in it in November last year and January this year respectively.
“WeWork is a major issue, besides the write-downs in Uber and Slack. We are afraid that SoftBank Group’s minority investors now face heightened risks after such poor reception for the WeWork listing, as other group or the SoftBank Vision Fund investments risk being painted with the same brush,” Atul Goyal, Equity Analyst, Jefferies had said in a report on SoftBank Group in September this year and shared with Financial Express Online. On the other hand, while WeWork and Uber could have $12 billion in mark-downs, according to the Jefferies report, this may not have much impact on SoftBank. “Given that SoftBank Group’s stake in SoftBank Vision Fund equity is closer to 50 per cent, the direct impact on SoftBank Group’s Gross Asset Value will be $6.3 billion or only 3 per cent of Gross Asset Value,” Goyal had said.