JPMorgan is raking in a fee of about $50 million for lining up $5 billion in financing that WeWork won't use

Reuters

WeWork offices in San Francisco

• JPMorgan will receive a fee of roughly $50 million for assembling a group of investors to lend $5 billion to WeWork - even though the coworking company didn't select that bailout option.
• WeWork's board has opted instead to go with a proposal from SoftBank, the Wall Street Journal reported on Tuesday.
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JPMorgan will receive a fee of roughly $50 million for assembling a group of investors to lend $5 billion to WeWork even though the company didn't opt for that bailout option, according to a person with knowledge of the arrangement.

Both JPMorgan and SoftBank, the coworking giant's biggest investor, had submitted competing rescue plans to the company's board. But WeWork has opted to go with SoftBank's bailout, the Wall Street Journal reported on Tuesday.

WeWork was left with a quickly dwindling cash pile that was expected to run out in the next few weeks after it shelved plans for an IPO.

JPMorgan had spent the last few weeks speaking to around 100 investors and building a book of commitments that could have provided WeWork with a rescue financing package. That included selling potential investors on several billion in unsecured payment-in-kind notes that carried a 15% coupon, Bloomberg had reported. The bank ultimately lined up enough interest, according to a person with knowledge of the package.

It is unusual for an investment bank to receive fees for deals that do not happen. JPMorgan has had a long relationship with WeWork - the Wall Street bank was set to be a lead underwriter on the company's failed IPO, and had also been tapped to put together a separate financing package continent on the offering.

JPMorgan had also arranged bank facilities for the company in the past, and is among lenders that extended a credit line to now-former WeWork CEO Adam Neumann. Funds managed by JPMorgan were early WeWork investors.

Goldman Sachs, also slated to underwrite the IPO and play a role in the linked financing package, didn't participate in talks to help WeWork line up rescue financing. The bank also owns a small stake in the company.

SoftBank will buy some $3 billion of stock (including nearly $1 billion from Neumann alone) via a tender offer to WeWork employees and other investors, at a valuation of just $8 billion, according to the WSJ report. Its last investment in January had valued the coworking company at $47 billion.

Neumann will resign from the coworking company's board but keep a board observer role, a stake in WeWork, and also earn a $185 million consulting fee, the WSJ said.

While JPMorgan won't be raking in any underwriting fees for a WeWork IPO in the foreseeable future, the roughly $50 million for the passed-over bailout is in line with a structuring fee the bank would have earned for arranging $6 billion in IPO-linked financing from a group of lenders, according to WeWork's S-1 filing.

SoftBank will also give Neumann a $500 million line of credit, which will allow him to pay back what he has taken out against a credit line of the same size from JPMorgan, UBS and Credit Suisse, the WSJ reported on Tuesday.

Neumann had also borrowed $97.5 million from JPMorgan across other lending products, including mortgages.