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Chapter 11 Plan
WeWork secured confirmation of its chapter 11 plan today in the Bankruptcy Court for the District of New Jersey today, with debtor counsel announcing unanimous creditor support. Attorneys Steven N. Serajeddini and Ciara Foster of Kirkland & Ellis, representing the debtor, presented the confirmation order to presiding Judge John Sherwood.
Approval of the chapter 11 plan hinged on a $32.5mn global settlement with the UCC, which was negotiated prior to today’s hearing. Judge Sherwood inquired as to how the professional fees of the committee ad hoc group were to be paid from the settlement. Foster explained that fees were to be paid “off the top” of the settlement, to which Judge Sherwood inquired “is there going to be anything left for the unsecured creditors?”
Kris Hansen of Paul Hastings, speaking for the UCC, clarified that after the deduction of professional fees from the settlement fund, general unsecured noteholders could anticipate a recovery of 4%, with a 1% recovery for general unsecured creditors.
Judge Sherwood, addressing the plan’s feasibility, stated that the settlements were “reasonable given the capital structure and the amount of prepetition debt of $4 billion and the valuation analysis of $600 million.”
The plan is also predicated on $450mn in new money financing, including $50mn in DIP financing and $400mn in exit financing. The financing, which combines the injection of fresh capital in exchange with equity distribution, will see commitment parties acquiring an 80% stake in the reorganized entity.
The Davis Polk-led ad hoc group of creditors will contribute $112.5mn, while Cupar Grimmond, with Cooley as legal counsel, provides the lion’s share of $337.5mn. In exchange for their considerable investment, Cupar is poised to obtain a 60% stake in the reorganized WeWork, with the ad hoc group acquiring 20% in equity. The remaining 20% equity distribution also extends to prepetition secured lenders, aligning with the terms of the debtor’s RSA.
Softbank’s role in funding the debtor’s letters of credit introduces a variable to the equity landscape, with the drawn LCs converting to equity and diluting the $450mn DIP-to-equity structure. WeWork will equitize the prepetition LC claims, which could see Softbank owning between 16% and 36% of the reorganized WeWork after dilution.
WeWork is set to emerge from bankruptcy in the coming days.
Jennifer Lappe, Esq.
jennifer.lappe@levfininsights.com
+1 346 256 1345
