WeWork reaches debt restructuring agreement with SoftBank

WeWork, the struggling office company, said on Friday it had reached an agreement with SoftBank and other investors to significantly reduce debt and secure new financing.

The deal would cancel or convert to 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 repay $1.9 billion of its remaining debt, which is two years later than the current maturity of those debts.

The deal culminates a tumultuous race for WeWork, once considered by venture capitalists to be one of the most valuable and promising start-ups. The company, founded by Adam Neumann and backed by SoftBank, sought to shake up the monotonous world of commercial real estate by renting trendy office space on a short-term basis 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 abandoned an initial public offering, Mr. Neumann resigned as chief executive, and SoftBank spent billions to keep the company going.

The pandemic has dealt another blow, drastically reducing the demand for office space. WeWork has spent the past few years cutting costs by renegotiating and terminating leases with commercial landlords, making progress toward future-proofing its business. But the company remains unprofitable and is heavily indebted.

The deal announced Friday will significantly reduce that debt, increase WeWork’s balance sheet cash by $290 million and give the company access to $475 million in new funding commitments. In a statement, WeWork said it was “ideally positioned to capture the tailwinds of the global shift to traditional office flexibility.”

WeWork shareholders will be able to vote on the terms of the debt restructuring, and the company will also seek bondholder approval.

After an initial gain on the announcement, the company’s stock price ended slightly lower on Friday at less than 98 cents. Its shares were trading above $8 at the end of 2021 after WeWork went public by merging with a special-purpose acquisition company.

WeWork said it notified the Securities and Exchange Commission that it would be late filing its annual report because of its debt deal. The company said it would aim to file the report by March 31.