In Oct., WeWork secured a $9.5 billion rescue package from SoftBank, a bailout package that would hand over at least 80% of the office-sharing startup to the Japanese bank. WeWork bonds rallied in hopes that the company was saved for near-death after a failed IPO.
Fast forward several months, sources told Reuters on Monday that SoftBank's bailout for WeWork just got complicated, warning that there's no bailout money.
Sources told Reuters that SoftBank's discussions with Mizuho, MUFG, and SMFG have stalled because lenders have hit internal lending limits to the firm. This means Japan's three largest banks won't provide capital to SoftBank, so it can bailout WeWork.
- SOFTBANK'S TALKS TO SECURE $3 BLN FROM JAPANESE BANKS HAVE STALLED -SOURCES
- SOFTBANK LIKELY TO ENTER NEW YEAR WITHOUT $3 BLN WEWORK FINANCING IN PLACE -SOURCES
Sources said the three big banks are working with SoftBank to develop alternative ways to provide financing while offsetting exposure. Option one that was pitched is using SoftBank's 26% stake in Alibaba Group as collateral.
"SoftBank is an important client so we want to do everything we can to help, but we have to consider our credit risk," a senior banker told Reuters.
WeWork is likely to enter the new year without the promised financing from SoftBank that could complicate things for the struggling office-sharing startup that is teetering on the edge of bankruptcy, with mounting debt and no plans on becoming profitable.
S&P Global Ratings senior director Ryoji Yoshizawa said another option is for the banks to create a syndicated loan for a bailout; he added that it would take too long as it appears WeWork has a funding crunch.
Earlier this month, Goldman Sachs agreed to bailout WeWork with a $1.75 billion line of credit.
With the bailout not adequately funded, does this mean WeWork has to take more cost-cutting measures, such as backing out of leases to survive? If so, this could be very disruptive to commercial property markets.