WeWork notes quiet on bankruptcy chatter; distressed index returns drop in October

By Cristal Cody

Tupelo, Miss., Nov. 1 – WeWork Inc.’s paper saw thin trading on Wednesday on the heels of news reports that the distressed company is planning an imminent bankruptcy filing.

WeWork’s paper has been thinly traded since the company missed interest payments on its bonds in October.

S&P Global Ratings said on Wednesday it downgraded WeWork Cos. LLC to selective default on the company’s plan to enter a forbearance agreement with noteholders that was effective Monday.

WeWork’s stock (NYSE: WE) plunged more than 46% over the session.

Stock indices all closed higher as Treasury yields pulled back after the Federal Reserve left rates unchanged.

The S&P 500 index rose 1.05%, while the iShares iBoxx High Yield Corporate Bond ETF jumped 69 cents, or 0.95%, to $72.87.

The benchmark 10-year Treasury note yield fell 8 basis points to 4.79%.

The CBOE Volatility index declined 7% to 16.87 after the decision.

Distressed returns ended October weak.

WeWork quiet

WeWork’s 7 7/8% senior notes due 2025 (CCC-/C) were last seen in mid-October at 2˝ bid, a market source said.

The notes have traded little since the company missed interest payments earlier in the month.

The bonds were quoted at 31 bid, 33 offered back on Aug. 8 before the company reported doubts about its ability to continue as a going concern.

On Oct. 2, the New York-based office share company skipped $37.3 million of interest payments due on its first-, second- and third-lien notes with 2027 maturities.

S&P said on Wednesday it lowered the ratings on its first-lien notes to D and the second-lien exchange notes to D, while leaving the 7 7/8% notes unchanged following WeWork’s forbearance agreement, which gives it until Nov. 6 before holders may take action over non-payment.

WeWork also reported that it has elected to withhold the interest payment that was due Wednesday on the 7 7/8% notes.

The company was reported by Reuters and the Wall Street Journal that it is expected to file for Chapter 11 bankruptcy as soon as next week.

WeWork had a problem convincing investors and takers of the office space in the post-Covid landscape.

Reddit was full of discourse on the company’s problems on Wednesday.

“I am skeptical of any business that consistently needs to raise venture capital,” user chockZ said. “WeWork had 15 funding rounds including six separate rounds in 2017 alone.”

Another remarked that the New York City-based company “missed the point of providing alternatives to open floor plan city offices.”

WeWork’s stock (NYSE: WE) plunged 46.49% to $1.22 on Wednesday.

Distressed index weakens

S&P U.S. High Yield Corporate Distressed Bond index one-day total returns closed Tuesday weaker at minus 0.82% from minus 0.49% on Monday.

Month-to-date total returns ended October at minus 6.17% from minus 5.39% at the week’s start.

September returns were 0.55%, compared to 1.9% in August, 2.96% in July and 4.67% in June.

Year-to-date distressed total returns fell to 10.5% in the prior session from 11.42% on Monday.

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