Fisker paper declines on widespread negative sentiment; WW notes move lower

By Cristal Cody

Tupelo, Miss., March 14 – Fisker Inc.’s bonds woke up in the distressed secondary market on Thursday on news reports the electric vehicle manufacturer hired restructuring advisers to help with a possible bankruptcy filing.

Fisker’s 2½% green convertible notes due 2026 were trading down over 3 points and in the single digits on more than $18 million of volume over the day.

Shares plunged over 50% as the company faces a Friday deadline to file its 10-K with the Securities and Exchange Commission.

“Not a lot of institutional investors are looking at it,” a source said. “This is one that people have been bearish on for quite some time. Unfortunately, they need to sell cars.”

Online opinions abounded with one Yahoo user noting that vehicle deliveries were promised “starting three years ago!”

Market tone was weak going into the afternoon and into the close.

Stock indices were all lower with the S&P 500 index down 0.29% on the day.

The iShares iBoxx High Yield Corporate Bond ETF dropped 37 cents, or 0.48%, to $77.12.

The benchmark 10-year note yield finished 10 basis points higher at 4.29%.

The CBOE Volatility index picked up 4.73% to 14.40.

Meanwhile, WW International Inc.’s distressed 4½% senior secured notes due 2029 (B3/B-) fell over 2½ points on Thursday as reports emerged that the company was engaged with lender talks.

WW’s stock hit consecutive new 52-week lows in the last three sessions.

“After trading flat to up through most of the day on March 13th, BUY-rated WW plummeted toward the end of the trading session,” Linda Bolton Weiser, senior analyst for the health, beauty and leisure markets at D.A. Davidson & Co., said in a note released to Prospect News.

“It seems the stock reacted to late-in-the-day media reports that WW hired law firm Gibson, Dunn in preparation for talks with their lenders,” Weiser said. “Perhaps it's just a rumor, or maybe WW is getting ready to renegotiate terms, which could be a good thing if they can secure lower rates. There is no bankruptcy risk at this time and no liquidity issue.”

Fisker bonds drop

Fisker’s 2½% green convertible notes due 2026 were trading on more than $13 million of volume by midday at 3½ bid and were lower at 3 3/8 bid by the close on more than $18 million of bonds traded on Thursday, a source said.

The issue was down from a high of 4 bid at the start of the session.

The bonds were last traded on Feb. 26 at the 6¾ bid to 7 bid range, according to Trace data.

Fisker also has $340 million of 0% senior convertible notes due 2025 that it priced in July 2023 with a single buyer.

“The bonds have a feature where they can sell the bonds back to Fisker, and Fisker has to give them cash,” a source noted of the securities. “The bondholder has been swapping out the bonds into cash. I would be surprised if there ever was really a sellers’ market for these bonds because they were placed with one holder, and that holder was never disclosed.”

The Wall Street Journal reported Wednesday the company has hired financial adviser FTI Consulting and law firm Davis Polk to assist with a possible bankruptcy filing.

Fisker representatives were not available for comment on Thursday.

However, MarketWatch reported late in the day that the company broke its silence with a statement that it often engages with outside advisers and is focused on raising additional capital and partnering with a large automaker.

In the company’s Feb. 29 earnings announcement that reported wider 2023 earnings losses, Fisker said it would need to seek additional equity or debt financing over the next 12 months. The company said it has taken steps that include discussions with an existing noteholder for an additional investment and reducing its workforce by approximately 15%.

Fisker reported that it “expects to conclude there is substantial doubt about its ability to continue as a going concern” when it files its annual financial statements for the year ended Dec. 31.

According to the Feb. 29 release and a March 8 regulatory filing, Fisker expects to file the 10-K report with the SEC by Friday.

Chairman and chief executive officer Henrik Fisker previously was at the helm of electric vehicle manufacturer Fisker Automotive, Inc. and Fisker Automotive Holdings, Inc., which filed for Chapter 11 bankruptcy back in 2013.

Fisker’s shares (NYSE: FSR) sank 52% to 15 cents in heavy trading on Thursday after setting a new 52-week low of 14 cents during the session.

The Manhattan Beach, Calif.-based company’s stock has a $7.22 annual high.

WW paper pressured

WW International’s 4½% senior secured notes due 2029 (B3/B-) were down over 2½ points at just under 41 bid in light trading by the close on Thursday, a source said.

The issue gave back ¼ point on Wednesday after gaining ½ point on Tuesday.

The notes have declined over 20 points year to date.

WW’s stock on Tuesday, Wednesday and Thursday hit new 52-week lows as the company faces rival service operators, the exit of longtime board member Oprah Winfrey and an investigation into possible federal securities law violations.

Shares fell more than 20% after WW International’s fiscal year 2024 revenue guidance announced Feb. 28 missed analyst expectations, combined with the news that Winfrey would not stand for reelection at the May annual shareholders meeting.

S&P Global Ratings downgraded WW and the bonds on Tuesday but said a near-term default is not likely.

The company had total debt at the end of 2023 of $1.45 billion, consisting of a $945 million term loan due April 2028 at SOFR plus 3½% and $500 million of the 2029 bonds trading at around 40 cents on the dollar, but does have some things going for it, Weinstein said.

“No denying it, financial leverage is sky-high,” she said. “WW has attractive, covenant-light long-term debt agreements with no maturities until 2028 and 2029.”

D.A. Davidson estimates WW with a 2024 EBITDA at $158 million and a 2024 free cash flow of $31 million versus a loss of $29 million in 2023.

In 2023, WW completed the $132 million cash and equity acquisition of telehealth platform Weekend Health, Inc., dba Sequence, but has faced competition for weight loss drug services so far in 2024.

WW has some advantages over rival competitors offering the GLP-1 weight loss drugs since it offers more than just drug prescriptions with its wellness care and advice services, Weinstein said.

The New York-based WeightWatchers operator’s stock (Nasdaq: WW) has hit consecutive new annual lows over the past three sessions.

Shares finished Thursday down 20.43% at $1.87 after trading as low as $1.59 over the day.

The stock had set new 52-week lows after declining 7% on Tuesday to $2.66 and again on Wednesday after dropping 12% to $2.35.

Distressed returns moderate

S&P U.S. High Yield Corporate Distressed Bond index one-day total returns were 0.22% midweek, compared to 0.38% on Tuesday and 0.18% on Monday.

Month-to-date total returns improved to 1.78% on Wednesday from 1.55% on Tuesday and 1.17% in the first session of the week.

Year-to-date total returns climbed to 4.44% by the midweek session from 4.21% on Tuesday and 3.82% on Monday.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.