SoftBank is looking to offload US$550m of WeWork bonds in a secondary sale this week, one day after the co-working company struck a deal with SoftBank and a syndicate of lenders to extend its credit facility for an additional year.
The notes for sale were originally part of a US$2.2bn package of 5% 2025 senior secured notes issued to StarBright WW LP, a SoftBank affiliate, in July 2020. As part of this transaction, SoftBank will split the US$2.2bn notes into US$550m of "Series II" notes that are for sale this week, and designated the remaining US$1.65bn bonds as "Series I" notes, according to marketing materials.
Joint bookrunners JP Morgan, Goldman Sachs, Mizuho, Deutsche Bank and Citi are expected to price the bonds on Thursday. Initial price thoughts are a cash price of 85.63 cents on the dollar, implying a 9.875% yield. WeWork's existing CCC+/CCC– rated 7.875% 2025 bonds were trading at a cash price of 96.125 to yield around 9.2% on Monday before the secondary sale was announced, according to MarketAxess.
WeWork will not receive any proceeds from the secondary note sale. The company closed a merger with SPAC BowX in October that gave the company total gross cash proceeds of US$1.283bn. On Monday WeWork said it had extended its credit facility with SoftBank and a syndicate of lenders from February 2023 to February 2024.
In a rating statement on Tuesday, S&P said it maintained a negative outlook on the company's CCC+ rating. While there is growing expectation that the company could offer a unique solution to large and small businesses in a return-to-work environment, there is still considerable uncertainty about what decisions companies will take on their real estate footprint.
"The adoption rates for all of WeWork's offerings could be highly variable given its concentration in urban areas," said S&P. "Gateway urban markets have been subject to shifting demographics as residents relocate to the suburbs to live and, in some cases, work following the imposition of new office capacity restrictions and reduction in real estate or due to the potential rise of satellite offices, which could lead to a sustained decline in the density of corporate offices in such areas."