WeWork burnt through $1.4bn in the final three months of 2019, almost all the cash injection its principal backer SoftBank provided, as costs from opening new buildings and sacking thousands of employees mounted.
The company said it ended the year with $4.4bn of cash and commitments, according to a letter WeWork chief executive Sandeep Mathrani and executive chairman Marcelo Claure sent to bondholders on Thursday that was reviewed by the Financial Times.
In October SoftBank injected $1.5bn of cash into WeWork as part of an emergency bailout that gave it control of the group. But promises of more funding in the future have been thrown into doubt in recent days as SoftBank threatened to walk away from a share purchase deal.
The letter from Mr Mathrani and Mr Claure showed that WeWork generated $3.5bn in revenues in 2019, up 90 per cent from a year before. However, it did not include the company’s full-year or quarterly loss.
In November WeWork disclosed that it had lost $2.2bn during the first nine months of 2019.
The cash burn figure that was disclosed underscored the strain on the company’s finances in the run-up to 2020, even before the outbreak of the coronavirus pandemic.
$6.9bn the amount of cash and commitments WeWork says it held at the end of September
While the company has closed only a handful of locations because of the virus, investors and employees fear that its tenants could soon begin cancelling lease agreements en masse.
“We want to reiterate that WeWork has a strategic plan and a sound financial position,” Mr Mathrani and Mr Claure wrote. “We believe this provides us the financial resources and liquidity to execute our plan through 2024, including managing the near-term challenges and volatility presented by Covid-19.”
The year-end cash position revealed on Thursday represented a sharp deterioration from the $6.9bn in cash and commitments WeWork says it held at the end of September, which the company disclosed to bondholders in November.
The $4.4bn figure for December included $1.3bn of cash WeWork had on its balance sheet, as well as $800m of restricted capital. It said it also had $2.2bn of cash it could draw down from a debt financing agreed with SoftBank in December, and $100m it was still owed from the Japanese group for one of its joint ventures.
Earlier this month SoftBank warned that it could back out of its deal to buy $3bn worth of WeWork shares from existing investors, a transaction the board thought was all but done. WeWork disclosed that a further $1.1bn of new funding it had expected from SoftBank had been put in doubt, given the financing was tied to that tender offer.
WeWork’s debt has plunged in value since the group aborted its initial public offering last year and co-founder Adam Neumann departed.
The outbreak of coronavirus has pushed the price on the $669m bond lower still, with the debt changing hands at 37.75 cents on the dollar on Wednesday, deep in distressed territory.
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