WeWork, the struggling office space company, said Friday it had reached an agreement with SoftBank and other investors to significantly reduce its debt and secure new financing.
The deal would cancel or convert into equity about $1.5 billion of the company’s debt, reducing WeWork’s total debt to less than $2.4 billion, the company said. Additionally, the company will have until 2027 to pay off $1.9 billion of its remaining debt, or two years after those debts are currently due.
The deal caps a tumultuous journey for WeWork, once regarded by venture capitalists as one of the most valuable and promising startups. The company, founded by Adam Neumann and backed by SoftBank, sought to shake up the humdrum world of commercial real estate by leasing trendy office space on short notice to large corporations, small businesses and individuals.
But that business model never lived up to the grand visions of Mr. Neumann and Masayoshi Son, the founder and chief executive of SoftBank. In September 2019, the company canceled an initial public offering, Neumann stepped down as CEO, and SoftBank spent billions to keep the company running.
The pandemic dealt another major blow, greatly reducing the demand for office space. WeWork has spent the past few years cutting costs by renegotiating and terminating leases with commercial landlords, moving towards becoming a sustainable business. But the company remains unprofitable and is heavily in debt.
The deal announced Friday will greatly reduce that debt, increase cash on WeWork’s balance sheet by $290 million and give the company access to $475 million in new financial commitments. In a statement, WeWork said it was “ideally positioned to capture the tailwinds of the global shift toward traditional office flexibility.”
WeWork shareholders will be able to vote on the terms of the debt restructuring and the company will also seek approval from bondholders.
The company’s share price was stable on Friday, hovering around the dollar. Its shares traded above $8 at the end of 2021 after WeWork went public by merging with a special purpose acquisition company.
WeWork said it had notified the Securities and Exchange Commission that it would be delayed in filing its annual report because of its debt agreement. The company said it would try to submit the report by March 31.