WeWork’s rescue package may be in trouble

Talks stall amid SoftBank’s efforts to secure $3B in loans from Japanese banks

Dec.December 23, 2019 09:19 AM
Softbank CEO Masayoshi Son (Credit: Getty Images)

Softbank CEO Masayoshi Son (Credit: Getty Images)

SoftBank Group is trying to borrow $3 billion from Japan’s three largest banks as part of its effort to save WeWork and it’s not going well.

Talks have stalled amid the lenders’ concern over credit risk and reports that the banks have hit internal limits, Reuters reported. The three banks involved are Mizuho Financial Group, Mitsubishi UFJ Financial Group and Sumitomo Mitsui Financial Group.

Despite halting discussions, the banks are trying to work with the Japanese conglomerate. One senior banker told Reuters that “SoftBank is an important client so we want to do everything we can to help, but we have to consider our credit risk.”

One idea reportedly on the table involves holding SoftBank’s 26 percent stake in Jack Ma’s Alibaba Group Holding as collateral for the loans.

The delay puts SoftBank’s rescue package for WeWork in a precarious position. To prevent the co-working firm’s bankruptcy following its botched initial public offering, SoftBank ironed out a $9.5 billion bailout with a $5 billion debt facility, a $1.5 billion commitment and a $3 billion stock tender offer. But to complete SoftBank’s plan for $5 billion in debt financing, a further $3.3 billion is needed.

With the Japanese institutions’ deadlocked over how to move forward, it seems likely that SoftBank may ring in the new year without the required debt in place.

According to Reuters, the roadblock among the banks prompted SoftBank to secure its $1.75 billion line of credit arranged by Goldman Sachs earlier in the month. [Reuters] — Erin Hudson

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