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SoftBank sells $550m of WeWork debt

SoftBank offered $550m price of WeWork debt it had supplied the lossmaking property group throughout its liquidity disaster greater than a yr in the past, agreeing to promote the bonds at a reduction to woo traders to the deal.

The Japanese telecoms-to-technology enterprise offloaded the debt, which carried a 5 per cent coupon and matures in July 2025, at roughly 86 cents on the greenback, stated two folks briefed on the matter. The low worth pushed up the yield on the bonds to 9.75 per cent, above the yield on WeWork’s current debt, which underscored the considerably lacklustre investor reception for the securities. Yields transfer inversely to costs.

The $550m debt was a part of a $2.2bn rescue bundle WeWork struck with SoftBank in 2019 and drew down final yr, because the supplier of shared workplace house struggled with the fallout from its aborted preliminary public providing that executives warned had introduced it to the brink of chapter. The pandemic additionally hit its enterprise, like a lot of the business property trade, arduous.

SoftBank founder Masayoshi Son had guess massive on WeWork, plunging billions of {dollars} into the corporate. The Japanese conglomerate, which suffered massive losses on the funding in WeWork as its valuation tumbled, in the end supplied rescue capital within the type of credit score traces and new debt.

In October WeWork finalised its long-awaited flotation, itemizing its shares on the New York Inventory Alternate by means of a merger with a shell firm. That merger and different related offers raised $1.3bn for the group.

WeWork has reported an uptick in occupancy in latest months in comparison with the depths of the pandemic, though analysts with S&P International warned this week that these ranges stay beneath the edge mandatory for it to interrupt even.

“The dedication from a broad set of traders signifies a continued assist for WeWork’s long-term imaginative and prescient and an ongoing perception within the success of the enterprise,” the corporate stated in an announcement.

Line chart of Yield on company’s bonds due in 2025 with a 7.875% coupon (%) showing WeWork’s other debt was hit by SoftBank’s decision to sell

The deal got here because the sale of recent debt has slowed from its breakneck tempo as bankers and traders put together for the tip of the yr. Nonetheless, bankers proceed to check urge for food for riskier offers, with a $300m bond for the online game platform Skillz coming to market with an 11 per cent coupon on Thursday, stated folks accustomed to the deal, marking one of many highest rates of interest on a brand new deal to hit the company bond market this yr.

SoftBank’s sale put stress on WeWork’s different debt. Its bond maturing in 2025 with a coupon of seven.875 per cent has fallen from 98 cents on the greenback at first of this month to roughly 95 cents on Thursday, pushing its yield from 8.6 to 9.6 per cent.

The ranking company Fitch assigned a low evaluation of triple C minus to the bonds, only one notch above default. The company stated the corporate ought to have sufficient money to proceed working after earlier fairness raisings.

“Nonetheless, a excessive diploma of uncertainty stays surrounding the workplace market setting, Covid-19 and exogenous shocks together with the evolving Omicron coronavirus variant,” Fitch analyst Kevin McNeil stated. “WeWork would require extra liquidity sources if the workplace market stays depressed for an elongated interval.”

SoftBank declined to remark.

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Written by colin

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