SoftBank commits $1.1 billion to WeWork even as members drop

SoftBank Group Corp. is including $1.1 billion to its WeWork dedication because the co-working firm weathers declining membership amid the coronavirus pandemic, in keeping with a employees memo obtained by Bloomberg News.

The new financing, “another sign of SoftBank’s continued support for our business,” boosts the New York-based firm’s out there money and unfunded money commitments to $4.1 billion, in keeping with chief monetary officer Kimberly Ross’s memo, the contents of which had been confirmed by a spokeswoman. The funding is within the type of senior secured notes.

“Covid-19 has had an impact on our business,” Ross wrote. While WeWork’s second-quarter income rose 9% to $882 million from a yr earlier, that marked a decline from its $1.1 billion haul on this yr’s first three months.

The firm’s membership base fell 12% to 612,000 within the second quarter from that prior interval.

One vivid spot: “We’ve seen renewed demand from leading enterprise companies as they look for flexibility on a global scale,” Ross wrote. The proportion of enterprise members was 48% within the second quarter, a slight improve from the primary.

The firm has been targeted on whittling prices after its preliminary public providing was shelved final yr. Its money burn — or free money outflow — was $671 million within the quarter, attributable to $116 million in non-recurring restructuring bills which included severance linked to layoffs. Still, the money burn was lower than the $1.three billion in WeWork’s peak outflow within the fourth quarter of 2019, Ross famous. The agency not too long ago exited leases for would-be areas in Baltimore’s Harbor Point and at 149 Madison Ave in Manhattan. It has 843 areas in 150 cities throughout 38 nations.

The new funding from SoftBank comes after its roughly $100 billion Vision Fund recorded losses after writing down WeWork’s valuation to $2.9 billion, down greater than 90% from its $47 billion peak.

SoftBank has invested greater than $10 billion in WeWork.

Last month, We Co., the mother or father of WeWork, requested a decide to dismiss a lawsuit introduced by two of its board members in opposition to SoftBank for reneging on a $three billion provide to purchase the co-working firm’s carefully held shares.

The new debt financing replaces a $1.1 billion dedication that was conditional on the tender provide agreed to final October, a SoftBank consultant mentioned.

WeWork’s $669 million of seven.875% senior unsecured notes due May 2025 final traded on August 5 at 70 cents on the greenback, greater than double a low of 35.25 cents on the greenback in March, in keeping with Trace knowledge.