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WeWork has emerged from bankruptcy as a private company after reducing its lease obligations and having $4 billion of debt forgiven. As we discuss in today's email, this restructuring includes a fresh $400 million in new equity capital and has positioned WeWork to be profitable by cutting substantial operating losses. But, the company’s future growth will be tightly controlled by major stakeholders like SoftBank and Yardi, who hold significant veto power over its operations.

Now, let's dig in!

WeWork Bankruptcy Details Reveal the Power of Its Big Backers

After a long and messy procedure, WeWork's bankruptcy is finally over. WeWork has finalized its bankruptcy, and new court documents reveal details of what WeWork will look like going forward. The first big change is that WeWork will no longer be a public company. "The Reorganized Debtors shall emerge from the Chapter 11 Cases as a private company on the Effective Date, and the New Interests shall not be listed on a public stock exchange," the filing states.

WeWork managed to achieve its goals through the restructuring. First, it reduced its lease obligations from as high as 779 locations in 2022 to 600. This cut its rent expenses by half, saving around $12 billion. Additionally, about $4 billion of debt was forgiven. With these reductions in lease and debt expenses, WeWork now claims it will be profitable. According to their press release, the company aims to "end the substantial operating losses that characterized the Company's years of hypergrowth and subsequent contraction."

Another significant boost from the restructuring is a fresh $400 million in "new equity capital." This injection of funds will greatly aid the company's growth but comes at a cost. The bankruptcy filing frequently mentions "subject to the consent of the Required Consenting Stakeholders." These stakeholders, who are providing the new capital, include "the SoftBank Parties, Cupar, and the Required Consenting AHG Noteholders." Cupar is short for Cupar Grimmond, an alias used by the Yardi family, owners of the property management software company Yardi.

Under the new company structure, almost everything will need approval from SoftBank, Yardi, and other senior noteholders. They will also be the first to be paid in case of any disputes over the company's expense obligations. While WeWork is in a better financial position to grow, its valuation is likely to be much lower than in previous years. Any significant plans may be constrained by the new ownership structures and the veto powers of the stakeholders who provided the capital to prevent the company from closing down altogether.

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