SoftBank Pumping In Another $1.1B Into WeWork To Help Offset Pandemic Impact: FT

SoftBank Group Corp SFTBY is lending $1.1 billion to WeWork to mitigate the effects of the COVID-19 pandemic on its business, the Financial Times reported Thursday.

What Happened

The financing is in addition to the $10 billion the Japanese conglomerate has pumped into the beleaguered office-leasing company, according to an internal memo seen by the Financial Times.

The funds are in the form of senior secured debt and have not yet been tapped, two people familiar with the matter told the Financial Times. The office-space company has 12 months to draw the loan, the sources revealed.

Why It Matters

The loan amount matches the $1.1 billion debt financing figure that was predicated on the Japanese company’s agreement to purchase $3 billion of WeWork’s shares. 

WeWork Chief Financial Officer Kimberly Ross told employees in the memo that the funds would help WeWork deal with large cash outflows in the second quarter, the Financial Times reported. 

The memo disclosed that WeWork spent $671 million during the quarter ended June, 40% higher than the preceding quarter. The figure included $116 million in restructuring costs.

The company also revealed its sales fell by a fifth, to $882 million, and memberships declined 12% to 612,000 in Q2.

SoftBank posted a $12 billion profit in its latest quarter earlier this week, driven by fellow WeWork Vision Fund investments, such as Uber Technologies Inc UBER and Slack Technologies Inc WORK.

Price Action 

SoftBank OTC shares closed nearly 1.8% higher at $30.19 on Thursday.

Editor's Note: SoftBank on Aug. 17 issued the following statement:

"SoftBank Group Corp. (“SBG”) notes that certain media reports alleging that SBG has made an additional commitment of USD 1.1 billion to The We Company (“WeWork”) are not correct. On August 12, 2020, a wholly owned subsidiary of SBG entered into an agreement with WeWork to commit to purchase up to USD 1.1 billion of senior secured notes issuable by WeWork (the “Senior Secured Notes”) as contemplated by the original Master Transaction Agreement dated October 22, 2019 between SBG and WeWork. SBG’s commitment to purchase such Senior Secured Notes is not, therefore, the provision of additional financial support to WeWork, but rather the provision of a previously agreed form of financing. Moreover, as of today’s date, WeWork has not issued the Senior Secured Notes."

Photo courtesy: Ajay Suresh via Wikimedia