SoftBank’s $3b WeWork financing talks stall, sources say

SoftBank’s talks with Japan’s three biggest banks for a US$3 billion financing for co-working firm WeWork have stalled, people familiar with the matter told Reuters.

The US$3 billion fund is part of SoftBank’s US$9.5 billion bailout for WeWork.

Photo credit: MIKI Yoshihito / Flickr

The three banks – Mizuho Financial Group Inc., Mitsubishi UFJ Financial Group Inc. (MUFG), and Sumitomo Mitsui Financial Group Inc. (SMFG) – have hit their lending limits to SoftBank and are also concerned about the risks involved in rescuing WeWork, according to the people.

The lenders are now seeking ways to provide the financing, such as using some of SoftBank’s 26% stake in Alibaba Group as collateral. Another option is a syndicated loan, which would be time-consuming and potentially delay financing, S&P Global Ratings senior director Ryoji Yoshizawa said in the report.

SoftBank announced the US$9.5 billion rescue package for WeWork in October after WeWork filed to withdraw its initial public offering. It includes up to a US$3 billion tender offer, a US$1.5 billion payment from SoftBank, and US$5 million in debt financing.

Last week, the office-sharing company said it has secured a US$1.7 billion letter of credit backed by Goldman Sachs as part of the package.

The rescue has been regarded as a case of “throwing good money after bad,” raising concerns about SoftBank’s investment and governance standards. In November, the company announced a US$6.5 billion quarterly operating loss, its first such loss in 14 years, according to Reuters.