S&P cuts WeWork

S&P said it cut its ratings on WeWork Cos. LLC and its 7 7/8% senior unsecured notes due 2025 to CC from CCC+. As of Dec. 31, there were $669 million of the notes outstanding.

“The downgrade follows WeWork's announcement that it entered into a transaction support agreement with certain affiliates of SoftBank Group Corp. and eligible bondholders, representing approximately 57% of the aggregate principal amount outstanding of the issuers' 7 7/8% senior notes due 2025 and approximately 68% of the aggregate principal amount outstanding of the issuers' 5% senior notes due 2025, series II,” the agency said in a press release.

S&P said it considers the proposed exchange offer the equivalent of default because lenders will get less than originally promised.

However, “We acknowledge the transaction offers meaningful cash interest cost savings and reduces leverage, which provides the company with financial flexibility, increasing the possibility of eventually reaching free cash flow generation,” the agency said.

S&P said it plans to downgrade WeWork to selective default and then upgrade the ratings to a level that reflects the risk of conventional default or another distressed exchanged.

The outlook is negative.

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