Nov 21, 2019

WeWork's axed IPO driving the yield on its bonds up

Felix Salmon, author of Edge
Expand chart
Data: FactSet; Chart: Axios Visuals

In mid-August the yield on WeWork's 2025 junk bond was 6.8%, and this week it hit 16.1%.

The state of play: WeWork's IPO was pulled at the end of September, depriving the company of billions of dollars in IPO proceeds as well as even more liquidity in the form of an attached loan commitment. That news drove the yield on WeWork's bonds up to 11.6%.

  • Since then, WeWork has revealed a stunning $1.25 billion quarterly loss; it is also now embroiled in an SEC investigation, as well as legal fights with disgruntled shareholders.

By the numbers: The bond traded this week at a price of $709, to yield 16.1%. It has 11 coupon payments left of $39.37 each, which means that if you hold it to maturity — and if it doesn't default — then you'll receive a total of $1,433.125 in principal and interest payments by the time the bond matures in May 2025. That's more than double the current price.

The bottom line: Before the IPO was pulled, WeWork had multiple funding sources, both in debt and equity. Now, however, Softbank seems to be the only institution willing to invest. If the Japanese tech giant ever tires of throwing good money after bad, then the chances of the 2025 bonds getting repaid in full look slim indeed.

Go deeper: WeWork to lay off 2,400 employees

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