WeWork Arranging $6b Financing, Contingent On IPOs Success

WeWork Cos. is arranging $6 billion in additional financing contingent on a successful initial public offering in coming weeks, according to people with knowledge of the matter.

The company — expected to make its market debut in September — is seeking to borrow in two ways: a $2 billion letter-of-credit facility and a $4 billion delayed-draw term loan, said the people, who asked not to be identified because the terms are confidential.

Banks will have to make good on their commitments only if at least $3 billion is raised in the stock offering. The larger facility can be drawn down beginning in September, and again in August 2020 and March 2021, if the company meets certain performance targets, one of the people said.

The New York-based company, which rents furnished office space to companies and freelancers, has been looking for ways to fund its expansion around the world, potentially investing in a broad array of businesses and properties, such as apartments and schools. Pressure on the company mounted after Japan’s SoftBank Group Corp. backed off a plan late last year to pump $16 billion of equity into the startup.

Now, the new financing round may give WeWork more discretion when setting the size of its IPO, which Bloomberg reported last week may raise $3.5 billion.

JPMorgan Chase & Co.’s representatives have told rivals it’s poised to commit as much as $800 million to the two facilities, the people said. Some potential lenders were asked to commit $750 million by this week, while others have until mid-August to solidify commitments of $250 million to $500 million. If the company receives pledges in excess of $6 billion, as it expects, it will probably scale down how much it draws from each lender accordingly, according to one of the people.

Spokespeople for WeWork and JPMorgan declined to comment.

The term loan may be priced at Libor plus 475 basis points and deemed pari passu — or equivalent in seniority — to WeWork’s outstanding bonds, said another person. The loan is highly structured and secured against cash and leases.

Banks are expected to receive upfront fees equal to about 3% of their final commitment.

Altogether, fees earned from lending to WeWork are expected to exceed the bounty banks will reap for handling its IPO. The fees being discussed for the stock sale range from 2.5% to 3%. That’s higher than the approximately 1.3% paid by Uber Technologies Inc. for its debut in May, according to data compiled by Bloomberg.

Bloomberg