Yardi will become the majority owner of WeWork in a $450 million bankruptcy exit plan

Attorneys for WeWork revealed at Monday morning’s bankruptcy hearing that asset management software provider Yardi Systems will become the majority owner of the coworking titan as part of its plan to exit bankruptcy.

Bisnow/Ethan Rothstein

The entrance to the WeWork location in DC’s Navy Yard

Under the terms of WeWork’s proposed financial settlement to exit bankruptcy, the company’s major creditors agreed to inject $50 million into WeWork to keep it afloat until it is expected to emerge from bankruptcy on May 31, and then an additional $400 million to cover costs of ending the restructuring.

Yardi will take a 60% stake in privately held WeWork after agreeing to contribute $337 million of the $450 million the company needs to exit bankruptcy. It will do so through its affiliate Cupar Grimmond, a largely unknown entity that controlled approximately 35 million shares of WeWork prior to its Chapter 11 filing.

Kirkland & Ellis partner Steven Serajeddini, who presented WeWork’s bankruptcy plan in court on Monday, confirmed that Cupar Grimmond is controlled by Yardi, which is also WeWork’s technology provider.

Yardi did not immediately answer Bisnow statement request.

SoftBank, WeWork’s largest creditor and investor before the Chapter 11 filing, should have about 16.5% of the equity after the bankruptcy filing, which could rise to 36% if the firm fails to meet certain financial standards, lawyers said during the hearing. .

A group of other WeWork creditors would control the remaining equity in the firm. Together, SoftBank and other lenders would contribute about $112 million in new money to keep WeWork alive.

“The unexpected size of the new need for money has, frankly, thrown everyone into a vicious circle,” said Eli Vonnegut, an attorney for senior lenders outside of SoftBank and Yardi. “What we have now, your honor, is what we believe to be very valuable: a quick and sure way out of this company’s bankruptcy.”

WeWork also reached settlements with landlords, with the company creating an $8.5 million settlement with a group of unsecured creditors.

The ability of some landlords to get paid after all has resulted in a contrast from previously contentious discussions between WeWork and property owners. Lawyers for the landlords and WeWork spent the weekend negotiating and resolving outstanding objections.

One of the biggest unresolved issues in the company’s bankruptcy plan was the fate of its headquarters and one of its largest locations. But in a filing just hours before the hearing, WeWork rejected its lease at Tower 49 in Midtown Manhattan, where it occupies 300,000 SF for its headquarters and coworking space with 2,800 members.

At the hearing, Judge John Sherwood pushed WeWork’s plan with Yardi forward, rejecting exiled co-founder Adam Neumann’s request that WeWork take his offer more seriously.

Neumann’s lawyers asked the court for a 12-day due diligence between WeWork and Neumann’s Flow Group. They argued that the company should have accepted their offer, but Sherwood said Neumann’s $650 million offer would not resolve the $4 billion in debt that SoftBank, Yardi and others agreed to wipe out as part of the exit financing deal.

“I have to believe that the financial stakeholders have considered their economic interests,” Sherwood said during the hearing. “We have to keep this thing on the schedule that the debtors have set.”

However, Flow’s lawyers are not backing down just yet. Flow claims WeWork failed to consider its offer, which would have violated bankruptcy law requiring debtors to try to maximize the value of their assets.

But if Neumann wants to continue his quest to regain control of the company he founded, he would have to convince creditors to negotiate and Sherwood to reject WeWork’s reorganization proposal.

“After several weeks of misleading the court, WeWork has finally admitted that it is seeking to sell the company to the Yardi-led group for much less than we continue to propose, so we expect that there will be strong objections to confirmation of this plan,” Susheel Kirpalani, Flow’s legal counsel, said in a statement. in the statement.

A final plan to exit the bankruptcy is expected to be decided at a confirmation hearing scheduled for May 30. If approved, the company could emerge from bankruptcy the next day – less than half of its pre-pandemic peak.

“Over the past six months, we have worked extremely hard to create a WeWork reorganization plan that is better capitalized, more operationally efficient, and positioned for continued investment in our products and services and a return to long-term growth,” WeWork CEO David Tolley said in a statement after Monday’s hearing.

Based on the company’s financial projections filed last week, WeWork will have 337 global locations, including 178 in 38 cities in the U.S. and Canada. It estimates it will be profitable next year, which would be a first for the company.

Neumann disputed those projections in a filing last week, predicting it would be cash-free by 2027.