WeWork Board Reviews Takeover Offer From Softbank
Here’s a round-up of comments from and citing Bond Angle this week as WeWork's Board mulls over its fate
23 Oct 2019 13:04
Bad news is far from over for WeWork bonds, but it could have been worse, as I told New York Times:
"SoftBank’s rescue plan has bought some time, analysts said, but WeWork still has to make some difficult decisions.
SoftBank’s rescue plan has bought some time, analysts said, but WeWork still has to make some difficult decisions. “The silver lining in the whole process is that SoftBank bought them,” said Vicki Bryan, chief executive of Bond Angle, a research firm."
23 Oct 2019 11:39
As I warned last week, the Softbank Takeover of WeWork is *not* an acquisition. Instead, as I expected, equity voting control is being engineered to avoid triggering a Change of Control, as reported by Bloomberg.
This means existing bonds will be buried under a mountain of new debt, mostly unsecured & likely unregistered new notes, which I had warned as potentially the plan all along (see Gravity Works As WeWork Doesn't; Now Plan B on 9/17/19)
Look for more discussion in an upcoming report.
22 Oct 2019 09:39
UPDATE: As I said, always read the fine print.
Turns out Softbank's takeover of WeWork will *not* be an acquisition and equity voting control is being engineered to avoid triggering Change of Control.
This is the bad news I have warned existing bondholders about, and now the bonds will be buried under a mountain of new debt.
PREVIOUS POST Good news: WeWork board accepted Softbank’s buyout package, which appears to be a change of control sufficient to trigger the exit put for its bonds—& bondholders should take it.
While the news seems most focused on the sweet deal ex-CEO Adam Neumann is getting for his stock, I noticed the deal also includes a massive $5 billion block of undescribed & likely unregistered debt.
I'll have more discussion in an upcoming report.
Mon 10/21/2019 6:23 PM
On reports that WeWork’s board is set to evaluate two rescue plans, again, from Softbank, it’s largest investor, and from its JPMorgan-led banks:
“We know the last time WeWork’s board considered both plans it rejected a strong, advantageous plan from Softbank that will help more quickly salvage the company and its shredded credibility and prospects in favor of the hideous WePIK bank plan which will saddle the company and existing bondholders with billions in new trashy bonds, including PIK notes.
That decision didn’t go over well with investors but since the Board is willing to hear both plans again rather than accepting Softbank’s plan outright we can see they still prefer to retain control even if it sinks the company.
It’s hard to say they learned anything—demonstrating again that Softbank’s plan which also will clean out WeWork’s board and management is probably best for the company’s stakeholders.”
21 Oct 2019 18:48
Meanwhile, WeWork may already be nearly or completely out of available cash, as I warned again in The Tide Is Out and WeWork Bondholders Are Naked" and from which the New York Times just cited:
"Vicki Bryan, chief executive of Bond Angle, a research firm, said WeWork might have been able to tap into only $1.5 billion of the $2.5 billion that it said it had at the end of June. Use of the rest of the money appears to be restricted because it included customer security deposits or because it was held by the company’s subsidiaries, she said.
In the first half of this year, WeWork consumed about $1.5 billion. If the company has continued to spend money at that rate, it may have depleted most of its unrestricted cash."
21 Oct 2019 17:29
As I say, wait for confirmation of a deal AND read the fine print. Subsequent reports clarify Softbank's latest plan to take over WeWork will be submitted along with JPMorgan Chase & Co (JPM US)'s ugly debt plan (I call it WePIK) to WeWork board tomorrow.
Recall the Board rejected Softbank's plan last time--big mistake (Softbank Who? WeWork Picks Bank Bailout; Bondholders Beware).
21 Oct 2019 15:12
If it's true Softbank Group (ADR) (SFTBY US) will take control of WeWork--& let's make sure it is--this can trigger Change of Control "Get outta jail" put at 101% of par which I have recommended that bondholders should take. Keeping WeWork bonds even with Softbank as parent doesn't fix serious issues I have detailed with nonregistered bonds, including severe dearth of publicly available information.
21 Oct 2019 15:01
Equity only Softbank Group (ADR) (SFTBY US) can love: Softbank said to pump in another $4-5B to take control of WeWork which, as I said again in Softbank Who? WeWork Picks Bank Bailout; Bondholders Beware, is the best possible outcome for foundering WeWork bondholders stuck in indefinite semi-darkness (& only Softbank can believe it's worth $7.5-8B).
21 Oct 2019 14:45
WeWork has years of legacy funding partners in place who still can't agree on a rescue package or even how much the company is worth after weeks of fighting. "Leaked" email from its new co-CEOs shows WeWork also has approached 75 MORE funding sources--and still no deal.
How is this comforting?
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