Bonds backing WeWork Cos. Inc. fell today after The Guardian reported the company could cut up to 25% of its workforce by Thanksgiving as it burns through the last of its cash reserves.
The issuer's sole bond offering, its $669 million of 7.875% notes due 2025 — which traded above par as recently as mid-September before the company's IPO foundations began to crack — sank to fresh lows of 79 this morning, after rebounding to 90 late last week when it emerged that both J.P. Morgan and SoftBank had put forward emergency bailout plans. Now the company reportedly is looking to lay off up to 2,000 workers as it mulls its options.
WeWork is running out of cash, having ultimately shelved its planned IPO that would have given it access to a $6 billion credit line in addition to any equity proceeds. The company's biggest backer, SoftBank, has proposed a multibillion-dollar debt-and-equity package that would give the Japanese firm control of the ailing office-rental startup. But sources said WeWork's board is leaning toward J.P. Morgan’s $5 billion rescue plan, which may include $2 billion or more of unsecured payment-in-kind notes with a hefty 15% coupon. Covenants on the existing bond issue limit the amount of debt that WeWork can add at this point, but the PIK structure would enable the company to delay some of its repayments at this crucial juncture.
WeWork reported a loss of $905 million for the first half of the year and had $2.5 billion in cash as of June 30. Management has been scrambling to find cost savings amid reports that cash will run out by the end of November. The company announced last week that it will close its early education school WeGrow after the current school year concludes and that it has put three noncore operations up for sale, including event organizing platform Meetup, office management company Managed by Q, and marketing company Conductor.
WeWork is a unit of The We Co.