By Joshua Franklin, Greg Roumeliotis and Mike Spector
<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = " text "content =" NEW YORK (Reuters) – SoftBank Group Corp <9984.T> is attempting to become the majority owner of WeWork without assuming the onerous lease bond of the US office-space sharing firm, according to people familiar with the matter. " data-reactid = "23"> NEW YORK (Reuters) ̵
<p class = "canvas atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "SoftBank is offering a $ 5 billion financing lifeline that The We Company, the parent of New York-based WeWork, is assessing against a proposal by JPMorgan Chase & Co
WeWork could run out of cash next month without new funding, sources said, after the company withdrew plans in September for an initial public offering (IPO). It left the IPO as investors questioned the big losses, the sustainability of the business model and the way WeWork was run by its co-founder and former CEO Adam Neumann, who now serves as chairman.
Over the weekend A special board of directors created by The We Company to evaluate the funding proposals, made by the influence of SoftBank and Neumann, worked around the clock with the advisors to reach a consensus, the sources said. The negotiations could be triggered next week, one of the sources warned.
SoftBank and the $ 100 billion Vision Fund own approximately one-third of WeWork through previous investments totaling $ 10.6 billion.
SoftBank's latest offer values WeWork to under $ 10 billion according to two sources, a fraction of the $ 47 billion it awarded in January in a previous round of collections.
While the split in SoftBank's contribution between equity and debt is still negotiated, investing can make it the majority owner of WeWork. If this were to be translated into formal voting control for SoftBank, it could force it to consolidate the loss-making company on the balance sheet, the sources said.
This, in turn, could cause SoftBank to assume WeWork obligations, which include long-term leases for office space that it refurbishes and leases under short-term contracts, according to the sources. WeWork had $ 18 billion in long-term leases from the end of June, according to the latest public financial disclosure. It also had $ 1.3 billion in net debt.
SoftBank has been keen not to charge its balance sheet further, given its net debt of around 500 trillion yen ($ 46 billion) at the end of June, more than half of its 9 trillion yen market capitalization, according to the Japanese technology conglomerate's latest quarterly earnings statement.
One way for SoftBank to avoid taking formal control of WeWork that would lead to accounting consolidation would be to accept non-voting shares for some equity investments. However, it is not clear how SoftBank plans to structure the agreement.
SoftBank also wants to renegotiate with WeWork a previous commitment of a $ 1.5 billion investment in the form of warrants to be executed in April for the valuation of $ 47 billion, cf. sources.
The sources asked not to be identified because the overlays are confidential.
A spokeswoman from WeWork declined to comment.
In the face of a cash crunch, WeWork is trying to slow the expansion, reducing the number of new leases for properties they are taking on.
The board of We Company has also agreed on a cost-saving plan that includes layoffs, said two of the sources, without divulging further details. The cuts will happen in the coming weeks, the sources added.
Job cuts in the United States may come the first week of November, one source said. Job losses in other parts of the world are also expected, the source added.
We Company's seven-member board had two directors in charge of representing the interests of all investors in the company by sitting on the special committee and reviewing funding plans, Reuters reported earlier this week.
One is Bruce Dunlevie, a general partner of WeWork shareholder Benchmark Capital. The other is Lew Frankfort, who is the former CEO of luxury handbag manufacturer Coach.
The board's advisors include investment bank Perella Weinberg Partners LP and law firms Skadden, Arps, Slate, Meagher & Flom LLP and Wilson Sonsini Goodrich & Rosati, one of the sources said.
Representatives of Perella Weinberg, Skadden and Wilson Sonsini did not immediately respond to requests for comment.
JPMorgan has not agreed to take out the debt package, and WeWork is waiting to see how much capital the bank will be able to raise from other lenders and credit investors. The debt package is split between about $ 1 billion in secured debt, $ 2 billion in unsecured debt and $ 1.5 billion to $ 2 billion in credit letters, two of the sources said.
A spokesman for JPMorgan declined to comment.
WeWork may try to combine SoftBanks and JPMorgan financing packages in one form or another, after the latter has completed its debt financing efforts, the sources said.
(Reporting by Joshua Franklin, Greg Roumeliotis and Mike Spector in New York; Additional Reporting from Anirban Sen in Bengaluru; Editing by Martin Howell and Matthew Lewis)