Valerie A. Potenza
WeWork’s Debt Capacity
In the wake of the pulled IPO of The We Company (f/k/a as WeWork Companies, Inc.) the company’s ability to incur debt is of interest. In its S-1/A for the IPO, WeWork contemplated a new bank facility, to be entered into concurrently with the equity offering. That facility would have provided $2B of letters of credit and $4B of delayed draw term loans; however, only $1B of those loans would have been available “prior to receipt of financial statements for the three months ended June 30, 2020.”
With the IPO now out of the picture, WeWork is in need of cash—both debt and equity—with Bloomberg yesterday reporting that two paths are contemplate $5B of debt or an equity investment by SoftBank pursuant to which it would control the company. In addition, in its S- 1/A, WeWork disclosed that under its existing (private) credit facility that as of the end of Q2 , while it was in compliance with its covenants under the credit agreement and LC arrangements, it would not have been able to borrow in the future under its credit agreement due to financial covenants.
WeWork has outstanding $669mm of 7.875% Senior Notes due 2025, issued in April 2018. Other than the 30% equity claw (70% must remain outstanding), these bonds are only callable at their make-whole until 3 months prior to maturity—at approximately 129. In this report we take a look at debt capacity under the Senior Notes.
