SoftBank Group Corp. is adding $1.1 billion to its WeWork commitment as the co-working company weathers declining membership amid the coronavirus pandemic, according to a staff memo obtained by Bloomberg News.
The new financing, “another sign of SoftBank’s continued support for our business,” boosts the New York-based company’s available cash and unfunded cash commitments to $4.1 billion, according to chief financial officer Kimberly Ross’s memo, the contents of which were confirmed by a spokeswoman. The investment is in the form of senior secured notes.
“Covid-19 has had an impact on our business,” Ross wrote. While WeWork’s second-quarter revenue rose 9% to $882 million from a year earlier, that marked a decline from its $1.1 billion haul in this year’s first three months.
The company’s membership base fell 12% to 612,000 in the second quarter from that prior period.
One bright spot: “We’ve seen renewed demand from leading enterprise companies as they look for flexibility on a global scale,” Ross wrote. The proportion of enterprise members was 48% in the second quarter, a slight increase from the first.
The company has been focused on whittling costs after its initial public offering was shelved last year. Its cash burn -- or free cash outflow -- was $671 million in the quarter, due to $116 million in non-recurring restructuring expenses which included severance linked to layoffs. Still, the cash burn was less than the $1.3 billion in WeWork’s peak outflow in the fourth quarter of 2019, Ross noted. The firm recently exited leases for would-be locations in Baltimore’s Harbor Point and at 149 Madison Ave in Manhattan. It has 843 locations in 150 cities across 38 countries.
{{/usCountry}}The company has been focused on whittling costs after its initial public offering was shelved last year. Its cash burn -- or free cash outflow -- was $671 million in the quarter, due to $116 million in non-recurring restructuring expenses which included severance linked to layoffs. Still, the cash burn was less than the $1.3 billion in WeWork’s peak outflow in the fourth quarter of 2019, Ross noted. The firm recently exited leases for would-be locations in Baltimore’s Harbor Point and at 149 Madison Ave in Manhattan. It has 843 locations in 150 cities across 38 countries.
{{/usCountry}}The new investment from SoftBank comes after its roughly $100 billion Vision Fund recorded losses after writing down WeWork’s valuation to $2.9 billion, down more than 90% from its $47 billion peak.
SoftBank has invested more than $10 billion in WeWork.
Last month, We Co., the parent of WeWork, asked a judge to dismiss a lawsuit brought by two of its board members against SoftBank for reneging on a $3 billion offer to buy the co-working company’s closely held shares.
The new debt financing replaces a $1.1 billion commitment that was conditional on the tender offer agreed to last October, a SoftBank representative said.
WeWork’s $669 million of 7.875% senior unsecured notes due May 2025 last traded on August 5 at 70 cents on the dollar, more than double a low of 35.25 cents on the dollar in March, according to Trace data.