US: WeWork’s lawyers have revealed that under its plan to exit bankruptcy, property management software provider Yardi Systems would become the company’s majority shareholder.
Under the terms of WeWork’s proposed deal to exit bankruptcy, the company’s senior lenders agreed to provide $50 million to keep it operational until it expects to emerge from bankruptcy on May 31, then an additional $400 million to cover the cost of exiting restructuring.
Yardi will take a 60 per cent stake in a private WeWork after agreeing to contribute $337 million of the $450 million the company needs to exit bankruptcy.
It will do so through its Cupar Grimmond affiliate, an entity that controlled around 35 million shares in WeWork prior to its Chapter 11 filing.
SoftBank, WeWork’s largest lender and investor prior to the Chapter 11 proceedings, would have roughly 16.5 per cent of the equity upon emergence from bankruptcy, which could go up to 36 per cent if the firm doesn’t hit certain financial benchmarks.
A group of WeWork’s other lenders would control the remaining equity in the company.
WeWork has also quit the lease at its corporate HQ, at Tower 49 in Midtown Manhattan, where it occupies 300,000 square feet for its head office and a coworking space with 2,800 members.
Co-founder Adam Neumann has not given up on his attempts to take back control of WeWork. Lawyers for his company Flow claim that WeWork failed to consider its offer, which would violate bankruptcy law requiring debtors to try to maximise the value of their estate.
“After misleading the court for weeks, WeWork finally admitted it is trying to sell the company to a group led by Yardi for far less than we are continuing to propose, so we anticipate there will be robust objections to confirming this plan,” said Susheel Kirpalani, an attorney for Flow.
The final plan to exit bankruptcy is expected to be decided at a confirmation hearing scheduled for May 30. If approved, the company could exit bankruptcy the following day.
“Over the past six months, we have worked extremely hard to develop a plan for a reorganized WeWork that is better capitalised, more operationally efficient, and positioned for continued investment in our products and services and a return to long term growth,” said WeWork CEO David Tolley.
Based on the company’s financial projections filed last week, WeWork would have 337 global locations. It estimates it will be profitable next year, which would be a first for the company.
Meanwhile, Yardi is facing an antitrust class-action lawsuit, along with a group of 18 property management companies, accused of being part of an alleged cartel orchestrating a scheme to fix the cost of US multifamily apartment rent.
