WeWork asks landlords to cut rent bill as SoftBank abandons bailout

SoftBank is abandoning plans to buy $3 billion of WeWork shares from investors, a major blow to the company as it struggles to stabilize during the pandemic.

The announcement was made to a board committee Wednesday evening, according to The New York Times. WeWork’s former CEO, Adam Neumann, is among the shareholders who will now miss out the chance to sell hundreds of millions of dollars worth of stock to SoftBank.

The rescue deal’s collapse comes as WeWork makes efforts to reduce its rent liabilities by as much as 30 percent. According to Bloomberg, WeWork CEO Sandeep Mathrani has been contacting landlords and proposing options including revenue-sharing agreements, with the goal of slashing rent by up to 30 percent.

The publication reported that some landlords pitched by Mathrani were reluctant.

SoftBank said it was walking back on the deal — reached last October — because of “multiple, new and significant pending criminal and civil investigations,” which changed conditions ahead of the deal’s April 1 closing date. The Wall Street Journal reported that SoftBank also cited business interruption from the coronavirus as a reason for reneging.

In response, WeWork’s board said it would evaluate its legal options, “including litigation.”

As of last year, WeWork had $47 billion in lease commitments over the next 15 years. An S-1 filing submitted as part of a botched IPO attempt showed the company had $4 billion in committed revenue from its customers and $2.5 billion in cash, half of which was unrestricted.

[NYT] — Sylvia Varnham O’Regan

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