SoftBank seeks control of WeWork through financing package: WSJ

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(Reuters) – SoftBank Group Corp. (T:) has prepared a financing package for WeWork Companies Inc that would give it control over the shared office space company, the Wall Street Journal reported.

The package would significantly increase the stake of SoftBank, which already owns around one third of WeWork, and further dilute the influence of co-founder Adam Neumann, the Journal reported.

Reuters previously reported that SoftBank was in negotiations to make a $1 billion investment to enable WeWork to go through a major restructuring.

WeWork is working with JPMorgan Chase & Co (N:) to negotiate a $3 billion debt deal after a planned initial public offering was tabled last month because of investor concerns about how it was valued and its business model, sources told Reuters.

WeWork lost $1.9 billion in 2018 and burned through $2.36 billion in cash in the first half of this year, and it could run out of money in the second quarter of 2020 at its current burn rate, according to an analysis last week by securities house Sanford C. Bernstein & Co.

In recent weeks, global credit rating agencies Standard & Poor’s and Fitch Ratings have also downgraded WeWork’s credit ratings deeper into junk territory, while the company’s junk bond is trading at a record low.

WeWork last month replaced co-founder Neumann as CEO with insiders Artie Minson and Sebastian Gunningham taking on joint CEO roles.

The pair have talked about the need to return to WeWork’s core business of renting out trendy office space to freelancers and enterprises. That would pull the company back from the fringe activities Neumann had forayed into, such as a school, apartment buildings and various businesses.

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