Landlords of WeWork with letters of credit (L/Cs) to guarantee that funds would be available to pay rent even if the now collapsed workspace provider faced financial difficulties may be able to swap their debt holdings for shares in the newly restructured company.

This is one of the options provided for in a new bankruptcy reorganisation plan to get the flexible workplace provider out of bankruptcy.

Restructuring plan

WeWork and its major financial backers, including Japan-based investment giantSoftBank Group, have agreed a plan with senior lenders, under which they would provide the companywith around US$450 million in Chapter 11 and exit financing.

In exchange, the financial backers would receive equity in the restructured business.

L/C arrangements

During a bankruptcy court hearing earlier this week, WeWork lawyer Steven Serajeddini mentioned that SoftBank and other holders of the company's current L/Cs could potentially exchange their debt positions for stock upon exiting Chapter 11.

The lawyer also said his client's stake will fall to 16.5 per cent when WeWork exits bankruptcy unless the company taps some undrawn L/Cs from SoftBank

Future prospects

The restructuring agreement marks a significant turning point for the company following its bankruptcy filing in November last year.

Pending court approval, WeWork is now poised to emerge from court protection in the upcoming months with reduced debt and a more streamlined, cost-effective lease portfolio.

This article represents the views of the author and not necessarily those of the ICC or Coastline Solutions.