(Bloomberg) -- WeWork is in talks with lenders led by JPMorgan Chase & Co. about a $5 billion debt package, seeking to ease a cash crunch that could leave the office-sharing company short of money as soon as next month, according to people familiar with the matter.
One option that’s been floated is raising $3 billion or more of the debt package through the sale of high-yield bonds, some of the people said. The financing could start to more formally come together as early as next week, but it may take longer for its structure and terms to be finalized, said the people, who requested anonymity because the talks are private.
SoftBank Group Corp., the largest shareholder in WeWork, is currently in advanced talks to acquire more shares at a significantly lower valuation than the $47 billion WeWork had in January, said two people familiar with those discussions. SoftBank had already agreed to contribute another $1.5 billion to the company next April, according to WeWork’s now-withdrawn prospectus for an initial public offering.
The financing talks sent the company’s bonds to their biggest gain on record. WeWork needs new financing before the end of November to avoid running out of money, two people familiar with the matter said earlier.
We Co. was one of the year’s most hotly anticipated IPOs, but a turbulent process turned into a cautionary tale of private market exuberance and cost the company’s top executive his job. The fast-growing, money-losing startup had been counting on a stock listing -- and a $6 billion loan contingent on a successful IPO -- to meet its cash needs.
The company’s bond prices climbed from record lows amid reports of the financing talks. Its senior unsecured notes due 2025 jumped more than 8 cents on the dollar to 90.50 cents at 2:34 p.m. in New York, after dropping to as low as 81.25 cents on Thursday, according to Trace bond trading data.
The terms and structure of the debt package are still fluid, the people said. Any high yield bonds offered as part of the package would likely be priced at a premium to the yield commanded by WeWork’s outstanding bonds, which were issued with a 7.875% coupon and currently offer a yield of around 10%, some of the people said.
Spokeswomen for JPMorgan and WeWork declined to comment.
The company’s new co-chief executive officers have been moving to slash costs and spin off businesses in the past two weeks in an effort to slow its cash bleed. Analysts had previously estimated that the company would run out of money by the middle of next year.
WeWork’s bonds, which traded above par less than a month ago, plunged into distressed levels during the past month, dropping more than 20 cents on the dollar before Thursday amid mounting concerns about the company’s cash situation. Fitch Ratings and S&P Global Ratings have cut WeWork’s credit grade further into junk on liquidity issues.
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