SoftBank sells $ 550 million in WeWork debt


SoftBank sold $ 550 million (486 million euros) of WeWork debt that it provided to the loss-making real estate group during its liquidity crunch more than a year ago, agreeing to sell the bonds at a price reduced to attract investors to the deal.

The Japanese tech-telecom company has offloaded debt, which carried a 5% coupon and matures in July 2025, at around 86 cents on the dollar, two people briefed on the matter said.

The low price pushed the bond yield up to 9.75%, above WeWork’s existing debt yield, underscoring investors’ somewhat lackluster reception for the stocks. Yields move in the opposite direction to prices.

Package

The $ 550 million debt was part of a $ 2.2 billion bailout WeWork put in place with SoftBank in 2019 and reduced last year as the shared office space provider struggled against the fallout from its aborted initial public offering which, according to executives, had brought it to the brink. of bankruptcy.

The pandemic has also hit his business hard, as has much of the commercial real estate industry.

SoftBank founder Masayoshi Son had bet big on WeWork, plunging billions of dollars into the business. The Japanese conglomerate, which suffered large losses on the investment in WeWork as its valuation plummeted, has finally provided rescue capital in the form of lines of credit and new debt.

In October, WeWork finalized its long-awaited IPO, listing its shares on the New York Stock Exchange through a merger with a shell company. This merger and other related agreements raised $ 1.3 billion for the group.

WeWork has reported an increase in occupancy in recent months from the depths of the pandemic, although analysts at S&P Global warned this week that those levels remain below the threshold needed to break even.

“The engagement of a wide range of investors indicates continued support for WeWork’s long-term vision and a continued belief in the success of the business,” the company said in a statement.

Debt

The deal came as the sale of new debt has slowed from its breakneck pace as bankers and investors brace for the end of the year. Nonetheless, bankers continue to test appetites for riskier trades, with a $ 300 million bond for video game platform Skillz hitting the market with an 11% coupon on Thursday, people familiar with it said. with the deal, marking one of the highest interest rates on a new deal to hit the corporate bond market this year.

The sale of SoftBank put pressure on WeWork’s other debts. Its bond due 2025 with a 7.875% coupon fell from 98 cents on the dollar earlier this month to around 95 cents on Thursday, pushing its yield from 8.6 to 9.6%.

The Fitch rating agency assigned the bonds a low triple C minus rating, just a notch above default. The agency said the company is expected to have enough cash to continue operating after previous capital increases.

“However, a high degree of uncertainty remains regarding the office market environment, Covid-19 and exogenous shocks, including the evolutionary variant of the Omicron coronavirus,” said Fitch analyst Kevin McNeil. “WeWork would need additional sources of liquidity if the office market remains depressed for an extended period.”

SoftBank declined to comment. – Copyright The Financial Times Limited 2021


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