SoftBank transferred almost $1.5bn to WeWork’s lenders less than a week before the shared office rental group filed for bankruptcy, court documents have revealed.
The Japanese conglomerate has endured steep losses on its investment in WeWork, which was one of the world’s most fêted startups when it first invested six years ago.
Now the beleaguered company is moving to ditch dozens of leases. On Monday it claimed it had a “bright future” after filing for Chapter 11 protection in the US bankruptcy court in New Jersey.
SoftBank’s latest payment – disclosed in WeWork’s bankruptcy filing – was first reported by the Financial Times, which estimated that the firm had now committed more than $16bn to WeWork since its initial investment in 2017.
It paid $1.47bn to lenders including Goldman Sachs on 31 October, according to the filing, as WeWork worked to “chart a value-maximizing path” with its stakeholders.
WeWork, valued at $47bn at its peak on the private market, suffered a stunning fall from grace in the wake of a botched bid to go public and the ouster of co-founder Adam Neumann in 2019. The onset of Covid-19 piled on further pressure, as companies and workers re-evaluated their reliance on the office.
The company, founded in 2010, spent heavily during its rise to acquire a mass of long-term leases in some of the world’s most expensive real estate markets. These commercial properties were then subdivided into smaller spaces for tenants, usually on a short-term basis.
As of June, WeWork had 777 locations across 39 countries, with 906,000 desks. (Guardian US leases space from WeWork.)
It eventually landed on the stock market in 2021, but faced a painful decline in value. Before trading of WeWork shares was suspended this week, its market capitalization was shy of $50m.
While executives at WeWork have sought to renegotiate with its landlords, and managed in some cases to reduce its rent obligations, they “could not overcome the legacy real estate costs and industry headwinds WeWork faced”, according to its bankruptcy filing.
Ahead of its first US bankruptcy court appearance on Wednesday, WeWork identified 69 leases it intends to break, including 41 in New York City. The company has already stopped using most of the spaces it plans to exit. It may look to reject more as the process continues.