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Nirit Cohen – WorkFutures
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Jonathan Price – CRE & Flex Expert
An ad hoc group of WeWork’s noteholders has expressed their ongoing frustration over the perceived stagnation in the company’s bankruptcy case, highlighting the absence of negotiations and any significant progress since they agreed to a hearing adjournment 10 weeks ago.
According to a report published by Pitchbook, the group has criticized WeWork’s latest disclosure statement for being too vague and non-committal — failing to adequately address creditor recoveries or define the terms of proposed exit financing.
Previously, WeWork noteholders made a decisive move by filing a motion in the bankruptcy court in New Jersey to appoint an examiner for a thorough investigation into the company’s Chapter 11 proceedings.
At the time, the noteholders filed a 43-page motion citing “fundamental flaws” and expressing concerns over a restructuring plan that appeared to disproportionately benefit SoftBank — its largest lender. The noteholders argued that SoftBank had effectively taken control of WeWork’s insolvency process, according to the previous report.
The group cites the lack of progress is due to internal conflict among WeWork’s three main secured lenders — SoftBank, Cupar, and a lender committee represented by Davis Polk — over providing debtor-in-possession (DIP), and exit financing is said to be worsening the company’s liquidity crisis.
Despite earlier intentions to secure additional financing, WeWork has indicated a willingness to move forward without it, according to a recently amended disclosure statement.
However, the possibility of securing a new-money DIP facility remains open as negotiations with stakeholders have reportedly narrowed.
Pitchbook reports that the ad hoc group is urging the New Jersey bankruptcy court to appoint a mediator and has requested a rescheduled hearing for their examiner motion on April 30, in hopes to address these ongoing issues more comprehensively.
The unsecured creditors’ committee has also opposed the conditional approval of the disclosure statement and WeWork’s request for an extension of its exclusivity periods. The creditors criticize the company’s lack of engagement with potential financing sources and purchasers.
Amid these complex legal and financial challenges, WeWork’s founder and former CEO Adam Neumann has also very publicly shown interest in the company.
Alex Spiro, an attorney for Neumann’s latest venture Flow, told The Financial Times that the company and its financial partners are ready to outbid any existing offers WeWork has received by 10%.
According to a report published by The Real Deal, the creditors stated that ignoring potentially viable alternatives like Neumann’s bid is “value-destructive and inexcusable.”
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Last month, the company stated that its eyeing May 31 as a goal/date to emerge from bankruptcy. As the court prepares for an important hearing on April 29, stakeholders and observers alike are keenly watching how WeWork will navigate its significant challenges and what implications it will have for the flexible work company that was once valued at $47 billion.
