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Startups

SoftBank plans to pump $5bn into WeWork

Japanese investor will not take a majority stake

WeWork's parent company is expected to choose soon between rival $5 billion funding offers from SoftBank Group and JPMorgan Chase.   © Reuters

TOKYO -- SoftBank Group will offer around $5 billion in financing to the parent of office-sharing unicorn WeWork as the loss-making company scrambles for cash, Nikkei learned Wednesday.

SoftBank will officially propose the plan to the We Company soon. The additional investment will come directly from the Japanese group rather than its roughly $100 billion Vision Fund.

The transaction would give Japanese billionaire Masayoshi Son's SoftBank a bigger stake in We but not a majority in terms of voting rights. Under the plans, the We Company would not become a SoftBank subsidiary.

The We Company reportedly also has talked with a group of potential backers led by JPMorgan Chase about a roughly $5 billion debt package. But the company reportedly has balked at the terms of the package, which includes high interest rates.

SoftBank's proposal would constitute an alternative for the We Company, which is moving to cut jobs after postponing its initial public offering.

Options for the SoftBank package include an issuance of nonvoting preferred stock. The aid package would be a mix of debt and equity.

SoftBank has called for better governance, cutbacks and other changes at We to put the company on track to profitability.

A greater role for SoftBank in We's management would help boost the company's creditworthiness. But if the aid fails to bring about a turnaround, SoftBank could find itself even more weighed down by the office-sharing startup.

The WeWork parent is expected to make a decision soon. The aid would relieve a serious cash crunch for We, which disclosed a roughly $1.6 billion net loss for 2018.

The company had envisioned raising a total of $9 billion through an IPO and debt financing.

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