SoftBank has agreed to lend $1.1bn to WeWork to help cover the disruptions caused by coronavirus, on top of the more than $10bn it has already invested in the lossmaking property group, according to a memo sent by WeWork’s chief financial officer to employees on Thursday.
WeWork has not yet tapped the $1.1bn financing, which has been structured as a senior secured debt, said two people briefed on the matter. WeWork would have 12 months to draw down the loan, the people added.
The new money would help the company cope with large cash outflows in the second quarter, according to the memo from finance chief Kimberly Ross. The loan lifted the company’s cash and unfunded cash commitments to $4.1bn at the end of June, up from $3.9bn at the end of March.
Ms Ross separately told creditors and investors on a conference call on Thursday that the company did not expect to need the $1.1bn imminently, but that it was nice to have the liquidity available, one person who heard the call said.
The staff memo revealed WeWork burnt through $671m during the three months to the end of June, up nearly 40 per cent from the quarter before. The figure included $116m of restructuring costs such as severance payments to laid-off employees. The company did not report its net loss in the memo.
WeWork also disclosed on Thursday that sales dropped by roughly a fifth from the first quarter to $882m and that its membership count — which spans freelancers to Fortune 500 companies — fell 12 per cent from 693,000 to 612,000 in the second quarter from the three months before.
“Though revenue is down from [the first quarter] due to Covid-19-related business disruptions, our overall financial foundation as well as our sales pipeline continues to grow stronger,” Ms Ross wrote.
Large enterprise clients have come to make up a larger proportion of WeWork’s membership base as the coronavirus crisis has unfolded, accounting for 48 per cent of its members at the end of June.
The company has dramatically slowed its expansion at the behest of SoftBank, with the majority of the buildings it opened in 2020 stemming from lease agreements it had signed in previous years. Ms Ross noted the company ended the quarter with 843 locations, up by just 15 buildings from the end of March.
In the first quarter by contrast, its building count swelled by 89 locations. WeWork has closed underperforming buildings and exited some leases as it has cut costs. It has also slashed its workforce from a high of 14,000 in 2019 to 5,600.
The new financing from SoftBank matches a $1.1bn loan that was agreed last year but which fell apart in April. That agreement was predicated on the completion of a tender offer in which SoftBank would buy $3bn of WeWork shares from existing investors, but the Japanese telecoms-to-technology group never went ahead with it.
WeWork, SoftBank and a group of investors have been locked in litigation 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 bond has more than doubled in value from a low hit in March, it is still sharply below levels just before the pandemic hit US financial markets.