Goldman Sachs is stepping in to bail out WeWork — and the size of the new loan looks queasily familiar.
The banking behemoth headed by David Solomon has put together a credit line for the flailing office-sharing startup worth $1.75 billion, sources said — just slightly over the value of a sickening, $1.7 billion golden parachute that was given to disgraced founder Adam Neumann.
The October payout to Neumann — which was soon followed by the layoffs of 2,400 WeWork employees — sparked outrage, as allegations of Neumann’s self-dealing and erratic behavior sent WeWork into a tailspin.
“This has nothing to do with [the] Neumann payout,” a Goldman source insisted. “This is a letter of credit facility for [WeWork] to be able to [rent new space from] landlords.”
Indeed, Goldman insiders already appear to be getting touchy about the new credit line, which was first reported by Bloomberg on Monday.
JPMorgan — whose chief executive, Jamie Dimon, took heat not only for botching WeWork’s IPO, but also for his cozy relationship with Neumann — had recently refused to pack a parachute for Neumann in a $5 billion bailout package it had offered WeWork, according to reports.
With Neumann still controlling WeWork’s board at the time, JPMorgan’s package was spurned.
“JPMorgan will be 100% driving some of these narratives on the street,” a source close to Goldman said when asked about the $1.7 billion figure. “They are bitter they are no longer involved.”
Indeed, Goldman CEO Solomon is now the key partner to WeWork’s owner, SoftBank CEO Masayoshi Son, in bailing out the beleaguered office-sharing company.
Nevertheless, “That number is laughably close to $1.7 billion,” said one investment banker, referring to the outrageous package Neumann got. “Goldman Sachs couldn’t get that to $2 [billion]?”
A JPMorgan source said Goldman’s new credit line doesn’t fundamentally change the past relationships between the banks, WeWork and Softbank.
“Goldman always worked with SoftBank on this and JPMorgan dealt directly with WeWork,” said a JPMorgan insider.
Goldman likely won’t find other banks to partner with it on financing the WeWork restructuring, which is still seen as a risky deal despite the company taking a painful markdown. Still, it won’t be going it alone, said Odeon Capital Group analyst Dick Bove.
“Hedge funds buy this type of stuff and private equity funds buy it, too,” Bove said. “Generally speaking, banks won’t get involved in something like this, but it will be a successful effort on Goldman’s part.”
Spokespeople for Goldman and JPMorgan declined to comment.
Source: Read Full Article