Busy News Week for WeWork
Bailouts, WeWork Board Battles, Warnings for Bondholders, WeWork bonds crash
Here’s a roundup of comments this week about WeWork from and citing Bond Angle.
21 Oct 2019 01:09
Another week starts out without a bailout package for beleaguered WeWork.
The company has been negotiating with its JPMorgan Chase & Co (JPM US) led banks and Softbank Group (ADR) (SFTBY US) its largest investor for weeks if not months over essentially the same terms—yet still have no deal.
The company's plummeting valuation obviously is a sticking point--I have estimated the equity value as low as $3 billion and recent reports suggest Softbank now considering a number less than $8 billion--far less versus the $11 billion it paid for its 30% stake--so there's already blood in the water with WeWork's valuation which is key to pegging the value of any rescue package.
The latest news I cited last week suggests Softbank's bailout equity infusion may not even buy it a controlling stake. Softbank's bonds are suffering as a result of the escalating WeWork risk, and CDS spread to hedge that risk has widened to the highest since January:
17 Oct 2019 13:41
WeWork's board continues its power struggle to the detriment of the beleaguered company's stakeholders, in my view, as it rapidly descends to failure.
Reuters reports the company has formed a special committee to evaluate rescue plans on the table, but mainly to "blunt" Softbank Corp (9434 JP) influence over the decision ().
Remember, this is essentially the same board group that rubber-stamped every move made by notorious ex-CEO Neumann, were enriched as Softbank & JPMorgan Chase & Co (JPM US)-led WeWork banks juiced the company's equity valuation by $40B or more, were glad to accept Softbank's cash equity & loans which have kept it afloat this long, now want to "blunt" Softbank's influence in what now has become an urgent rescue bailout versus the hideous Bank plan for $5 billion in debt, including $2 billion in PIK notes (see Softbank Who? WeWork Picks Bank Bailout; Bondholders Beware).
At this point, with the company literally weeks away from running out of cash and its business in shambles, the most responsible option that best serves its stakeholders is to sell controlling interest to Softbank which will ensure its survival for the foreseeable future with vital financial support for its multiyear turnaround while bolstering its shredded credibility with landlords and customers now rightly wary of doing any business with WeWork.
But no, the Board and WeWork top management seem most concerned only with losing their jobs since Softbank surely will do a complete management cleanout as its first order of business when it gets control of WeWork--which seems totally justifiable after the fiasco they made.
This also is the best WeWork bondholders can hope for.
16 Oct 2019 17:29
WeWork bondholders learned "Rescue Package" from its JPMorgan Chase & Co (JPM US) led banks means billions in PIK notes (!). New "Rescue of the Day" has WeWork Board back to considering Softbank Group (ADR) (SFTBY US) package of equity+debt but no buyout, but let's see the fine print.
I had detailed comparisons of both plans in Softbank Who? WeWork Picks Bank Bailout; Bondholders Beware, and expect something like Softbank's original terms to resurface: $1 billion in equity now plus the $1.5 billion pledged next year which it may accelerate to this year.
16 Oct 2019 16:09
Like I said, wait for the fine print to see what WeWork's bailout turns out to be. For example, if Softbank Group (ADR) (SFTBY US) doesn't get controlling interest bonds don't get saved via 101% Change of Control put. Also, Softbank may not be able to replace Board & Management as it wants, at least not yet.
16 Oct 2019 13:36
JPMorgan Chase & Co (JPM US) is struggling to get interest in WeWork PIK notes at 15% yield. Why? PIK notes, 15%.
As I warned Tuesday, picked up by Bloomberg (see link below) PIK notes are bad enough, & WeWork PIKs deserve "yield of 18% or more" because “After all, WeWork’s credit metrics remain off the chart ugly,” Bryan said in the note."
Referencing Softbank Who? WeWork Picks Bank Bailout; Bondholders Beware.
16 Oct 2019 12:50
Whatever the WeWork bailout turns out to be, investors should be wary about the massive debt package it's bound to include:
“WeWork’s credit metrics remain off-the-chart ugly,” Vicki Bryan, chief executive officer of Bond Angle, a high-yield credit research company, said in a note Tuesday."
Referencing Softbank Who? WeWork Picks Bank Bailout; Bondholders Beware.
15 Oct 2019 11:51
WeWork probably shouldn't have rejected Softbank Group (ADR) (SFTBY US), which is "considering buying out other investors" to get control & then making "sweeping changes to its board & management."
15 Oct 2019 11:21
In Financial Times, My view on PIK notes planned with ugly Bank bailout for WeWork:
“Such notes are rare because they typically are highly undesirable since they are issued by extremely distressed companies and end up adding to an already massive debt load,” noted Vicki Bryan, founder of research company Bond Angle.
15 Oct 2019 10:41
So after WeWork bonds crash on news of ugly Bank bailout (hello 15% PIK nts), its Board "leaks" it hasn't ruled out buyout by Softbank Corp (9434 JP) because apparently having a strongly supportive, well-capitalized patron/investor is a good thing to have vs BK (as I said in Softbank Who? WeWork Picks Bank Bailout; Bondholders Beware).
15 Oct 2019 09:01
WeWork bonds hit new lows on news that the company rejected the Softbank buyout proposal in favor of the Bank bailout which calls for a massive debt raised, including high yield PIK notes. Yes, PIK notes.
That's not all the bad news about the Bank's plan, as I detail in Softbank Who? WeWork Picks Bank Bailout; Bondholders Beware. Bondholders are not taking it well:
15 Oct 2019 00:28
I warned last night in Softbank May Blink First (WeWork Bondholders Hope) that something dire is keeping WeWork's Banks & Softbank Corp (9434 JP) from signing a vital bailout deal. Wow—turned out to be so true.
WeWork rejected Softbank's buyout plan for the one floated by its Banks, so check out horrendous terms with new debt to come in the link below and look for more discussion from me in an upcoming report.
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