Do WeWork Bondholders Know Something We Don’t?
Debt investors haven’t bailed, despite the drama swirling around the company’s delayed IPO. A tiny clause in its prospectus may explain it.
Don’t count this guy out.
Photographer: Michael Kovac/Getty ImagesCompared with stock buyers, bond investors are usually considered a rational bunch. They scour through a company’s financials, measure its cash flows and calculate their odds of recovery in the event of a default.
So when it comes to WeWork’s $669 million junk-rated debt due 2025, which pays less than an 8% coupon, you can’t help but wonder: Who owns these things? This is a company that managed to burn through more than $2 billion of cash last year, thanks to an expansion spree. Its Ebitda margin, at -75%, effectively says that for every dollar the co-sharing work-space operator earns, it manages to spend $1.75.