Yardi set to become majority owner of WeWork in $450 million bankruptcy exit agreement

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During a bankruptcy hearing, it was revealed that WeWork's majority ownership would be assumed by property management software provider Yardi Systems as part of the company's plan to emerge from bankruptcy. Under this plan, WeWork's senior lenders would inject $50 million to sustain operations until the expected exit from bankruptcy on May 31, followed by an additional $400 million to facilitate the restructuring process.

Yardi Systems would acquire a 60% stake in a private WeWork entity by contributing $337 million of the total $450 million needed for the bankruptcy exit. This investment would be made through Yardi's Cupar Grimmond affiliate, which had significant holdings in WeWork before its Chapter 11 filing. Steven Serajeddini, representing WeWork in court, confirmed that Cupar Grimmond is controlled by Yardi, which also provides technology services to WeWork.

SoftBank, WeWork's main lender and investor before the bankruptcy proceedings, is expected to hold approximately 16.5% equity upon emergence from bankruptcy, potentially increasing to 36% based on certain financial milestones. Other lenders would collectively control the remaining equity, contributing around $112 million in fresh capital to sustain WeWork's operations.

Additionally, agreements with landlords, including an $8.5 million settlement fund for unsecured creditors, were part of the bankruptcy plan. WeWork also rejected its lease at Tower 49 in Midtown Manhattan, one of its largest locations.

Despite objections from exiled co-founder Adam Neumann's attorneys, who sought additional time for due diligence on Neumann's bid through Flow Group, Judge John Sherwood pushed the WeWork-Yardi plan forward. Neumann's $650 million offer was deemed insufficient to address the $4 billion debt relief agreed upon by stakeholders.

The confirmation hearing for the final bankruptcy plan is scheduled for May 30, with WeWork expected to emerge from bankruptcy the following day. CEO David Tolley expressed optimism about WeWork's future, citing a reorganized structure that is better capitalized and operationally efficient, with projections indicating profitability next year. However, Neumann's filings cast doubt on these projections, foreseeing a cash shortfall by 2027.

Original article posted on April 29, 2024

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