By: Dale Tichansky
The story of WeWork’s junk-debt offerings continues to sound more like an adventure novel, full of derring-do and ingenious last-second escapes.
The approximately $5-billion financing package led by JPMorgan Chase & Co. “is the company’s preferred option, rather than selling a controlling stake in itself to SoftBank Group Corp.,” according to Crain’s New York Business. “The structure and terms under discussion may change depending on investor appetite. Notably, the financing may include at least $2 billion of unsecured payment-in-kind notes with an unusually hefty 15% coupon, one person said.”
That proposed yield, Crain’s continued, “nearly double what WeWork paid on its debut bond offering last year — underscores skepticism among debt investors that the company will be able to stem its cash bleed and become profitable anytime soon. It’s a costly option that may however reward investors handsomely in the event of an actual turnaround.”
The company is scheduled to run out of cash by November and investors are trying to save it from bankruptcy, according to the International Business Times.
“Japan’s SoftBank Group Corporation and J.P. Morgan Chase are working in an effort to save WeWork from going under this year by securing emergency funding,” Fox News reported. “Earlier this month, FOX Business’ Charlie Gasparino reported on financing efforts. The company expects to lay-off at least 2,000 of its employees as a result of its failed IPO. SoftBank owns 29 percent of The We Company, parent firm of WeWork, and has invested $10.7 billion in the business.”
Bloomberg reported on Monday that WeWork was “leaning toward an almost $5 billion financing package led by J.P. Morgan rather than selling a controlling stake to SoftBank, which has already plunged over $10 billion into the business. J.P. Morgan is the third-biggest outside shareholder, behind SoftBank and Benchmark,” reported cnbc.com. “It’s been a dramatic reversal of fortune for WeWork, which was until recently one of tech’s highest-flying private companies. SoftBank’s latest funding earlier this year valued the company at $47 billion and set it up for what was supposed to be a blockbuster IPO. But public investors proved unwilling to comply, punishing cash-burning companies Lyft and Uber after their share sales in the months leading up to WeWork’s filing.”
Indeed, the company “revealed a $900 million loss over six months in its prospectus, investors immediately balked. The company, which rents out co-working spaces to start-ups, freelancers and enterprises, has to plunge cash into real estate in some of the most expensive markets and makes money back over time as tenants pay their rent. In its prospectus, the company reported long-term lease obligations of $17.9 billion,” cnbc.com added.
