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    Categories: Legal News

WeWork Secures Agreement on Bankruptcy Financing, Addresses Landlords’ Concerns

In a significant development for WeWork’s Chapter 11 proceedings, the company has successfully addressed landlords’ objections to its bankruptcy financing agreement. This resolution was announced on Monday, following U.S. Bankruptcy Judge John Sherwood’s approval, overseeing the proceedings in Newark, New Jersey.

Landmark Compromise Reached

WeWork, backed by SoftBank, has reached a compromise that involves reserving a portion of any future loans in an account dedicated to rent payments. The approved deal allows SoftBank to redirect up to $682.5 million into new credit facilities designed to support WeWork’s rent obligations.

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Enhanced Flexibility for SoftBank

While SoftBank had initially posted funds as collateral for WeWork’s rent costs, the redirected funds provided SoftBank with increased flexibility. This maneuver enables extending and replacing expiring credit agreements, mitigating the risk of landlords attempting to collect on the posted collateral.

No New Borrowing, but Future Funds Reserved

WeWork’s attorney, Ciara Foster, clarified in court that the company is not borrowing any new money as part of the approved financing. However, a portion will be reserved to fulfill landlord payments if further funds are brought in through future loans or asset sales.

Acknowledgment from Judge Sherwood

Judge Sherwood expressed gratitude towards WeWork and its landlords for reaching an agreement that he deemed “good for the case.” Despite the resolution, he acknowledged that WeWork’s landlords still face substantial financial risk, emphasizing their crucial role in the proceedings.

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Addressing Landlords’ Concerns

To address landlords’ objections, WeWork and SoftBank revised the financing agreement, ensuring that it does not grant additional “perks” to SoftBank for funds already posted as collateral. This revision aims to prevent SoftBank from gaining extra lending fees, expenses, and new rights to be repaid first from specific assets.

Next Steps for WeWork

With the financing dispute resolved, WeWork must now provide more information to landlords about its future business plans. This transparency is crucial for landlords to evaluate whether WeWork’s desired rent concessions are an “investment worth making,” according to Douglas Rosner, an attorney representing a group of landlords.

WeWork’s Restructuring Efforts

WeWork has actively pursued negotiations to reduce rent costs during its bankruptcy. The company has already canceled approximately 70 leases since filing for bankruptcy on November 7. Attorney Steven Serajeddini stated that WeWork will seek court permission to cancel additional leases in the coming weeks.

A Milestone in Chapter 11, Restructuring

A WeWork spokesperson highlighted the consensual resolution on bankruptcy financing as “an important step forward” in the company’s Chapter 11 restructuring. This reflects continued support from lenders and vital financial partners for the once-valued $47 billion company that faced challenges due to a rapid expansion and steep losses before filing for bankruptcy protection on November 7, 2022. WeWork struggled to achieve profitability amid declining demand for shared office spaces following the rise in work-from-home trends during the pandemic.

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Maria Lenin Laus: