3 minute read | November.08.2023
WeWork Inc. and 517 of its affiliates filed Chapter 11 bankruptcy petitions on November 6. At its height, WeWork was valued at $47 billion, but the company’s Class A Common Stock declined more than 98 percent this year.
WeWork had over $4.2 billion in outstanding debt obligations immediately prior to entering Chapter 11, almost all of it secured, according to the company’s first day declaration.
According to Reorg, WeWork had $1 billion in senior LC facility obligations and $552 million in junior LC facility obligations outstanding as of the petition date. WeWork also owes approximately $2.2 billion to secured noteholders and another $179.6 million to unsecured senior noteholders.
The LC facility credit agreement is available here. Goldman Sachs International Bank is the administrative agent for the senior LC tranche and Kroll is the administrative agent for the junior LC tranche.
Under the credit agreement, assignments to new lenders must be consented to by the applicable administrative agent and each issuing bank for the relevant facility. Agent and issuing bank consents may not “be unreasonably withheld, conditioned or delayed.” Issuing banks are deemed to consent to an assignment unless they object in writing within five business days of receiving notice of the assignment. There is no deemed consent provision with respect to administrative agent consents. Obligor consents are waived during an event of default, including bankruptcy.
When the credit agreement was last amended on February 15, 2023, LC facility lenders included Goldman Sachs, JPMorgan, Deutsche Bank, Mizuho, Société Générale, Citibank, Bank of America, and One Investment Management.
On November 6, 2023, WeWork entered into a restructuring support agreement with SoftBank and certain other holders of WeWork debt. The RSA contemplates that senior and junior LC facility claims will be fully equitized and that the company will emerge from bankruptcy by March 4, 2024.
With respect to transfers, the RSA provides that consenting stakeholders may only transfer to other consenting stakeholders or to QIBs/institutional accredited investors/non-U.S. persons in offshore transactions that deliver an executed joinder to the RSA to the company parties and counsel to the consenting stakeholders at or prior to closing.
Consenting stakeholders that acquire additional claims or interests must timely notify the company parties and counsel to the consenting stakeholders of the transfer. One quirk of the RSA is that Section 8.01(b) requires consenting stakeholder transferees to deliver notice of transfer to the company parties and counsel for the consenting stakeholders within three business days of acquisition, while Section 8.03 requires consenting stakeholders that acquire additional claims to notify those same parties within five business days of acquisition. As transfers that fail to comply with Section 8.01 are void ab initio, consenting stakeholder transferees should make sure to provide notice within three business days of transfer and reference both notice provisions when doing so. Transfers must also comply with any bankruptcy court order aimed at preserving tax attributes.
Non-consenting stakeholders that are acting as qualified marketmakers may purchase and sell RSA paper without having to sign the RSA, provided that the downstream sale occurs within five business days of the QM’s buy-in and the transfer otherwise complies with the RSA’s transfer restrictions. Additionally, consenting stakeholders may buy and sell non-RSA paper without the paper becoming subject to the RSA.