WeWork Mounts Charm Offensive As Bondholders Run For The Exits

WeWork is mounting an effort to convince investors and debt holders that it has the financial wherewithal to survive even as questions mount about its decision to keep most locations open amid the coronavirus pandemic.

The embattled shared office company posted a letter its investor website Thursday that said it had $4.4 billion in cash or cash commitments at the end of 2019, enough capital to get it through the current crisis and its broader five-year plans. The letter also said that in 2019 total revenue increased by 90% to $3.5 billion but did not include information on losses in the period.

According to WeWork’s securities filings before its failed IPO last year, it had lost $1.9 billion on revenue of $1.8 billion in 2018. Those losses continued to expand, reaching $1.25 billion in just the third quarter of 2019, according to a report to debt holders. In the first three quarters of last year, losses of $2.6 billion still exceeded it revenue, which was $2.4 billion. WeWork will release full 2019 results during a conference call with bondholders this afternoon.

The offensive hasn’t been convincing many of them. WeWork’s bonds were trading at 43 cents on the dollar Thursday, down from 62 cents Tuesday—already a distressed price typically reserved for companies at risk of defaulting on interest payments and possibly heading for bankruptcy.

The disclosure comes as WeWork’s largest investor, SoftBank, is attempting to walk back its commitment to a $3 billion tender offer to shareholders next month. The Japanese conglomerate had cited ongoing investigations by the Securities and Exchange Commission and the Justice Department as reasons to walk away.

The company’s stay open strategy has infuriated tenants and some employees as businesses around the world have been shutting their doors to stem the spread of the virus. WeWork’s website indicated that no North America locations are currently closed. In several instances which a member or employee has tested positive for the virus, WeWork has closed the effected floors for a brief cleaning period and then reopened. Since March 12, the company has been allowing (not requiring) its own employees to work from home, but this week began offering $100-per-day bonuses to community team members who go into its locations.

Tenants asking for refunds have been told that as long as WeWork needs to pay its own landlords it will require them to keep paying. In one email, a member of WeWork’s support team told a tenant in New York: “Should your building be mandated to close, you would receive concessions for the days it was closed for. At this point in time, we are following the same protocols as other landlords in the city and are following standard regulations. We are also paying rent to the buildings we occupy every month and that hasn’t changed yet. Should they pass along an alleviation to us, we will pass that along to you.”

Defending the decision to remain open Chairman Marcelo Claure and CEO Sandeep Mathrani wrote: “From healthcare and insurance providers to cleaning product suppliers and transit authorities, companies rely on us in order to operate. For that reason, we continue to remain open and accessible.”

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