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Nov. 11, 2019, 8:27 p.m. EST

WeWork bonds slip to new low amid renewed scrutiny of financial metrics, reports that T-Mobile CEO may be in line for top spot

Office-share venture takes steps to explain path forward

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By Joy Wiltermuth


Bloomberg News
WeWork Cos Inc. offices in Manhattan.

WeWork’s corporate bonds slumped to a fresh low Monday after a series of reports pointed to a bumpy path ahead for the office-share venture as it seeks to shore up investor confidence following its nearly $10 billion bailout.

While U.S. bond markets were shuttered for the Veteran’s Day holiday, WeWork’s nearly $700 million of outstanding junk bonds traded elsewhere at a fresh average low of $78.65 cents on the dollar Monday, down from an average of $82.20 cents on the dollar Friday, according to bond data and trading platform MarketAxess.

Bond prices move in the opposite direction of yields, and at Monday’s trading levels, WeWork’s debt was set to yield 13.52%, almost double its 7.875% yield at issuance some 18 months ago when the company still was considered a rising star in real-estate markets.

The company’s bonds briefly punched above 91 cents on the dollar on Oct. 14 amid optimism about a planned multibillion-dollar rescue of the platform, but sank in trading the next day as bankers circulated a rescue proposal that would have added more debt to the company.

The bonds, which mature in May 2025, have struggled since to stay above 85 cents on the dollar in trading, according to MarketAxess.

Investors on Monday were digesting a Wall Street Journal report over the weekend that detailed how WeWork repeatedly locked horns with the U.S. Securities and Exchange Commission over its use of controversial financial metrics, particularly one called a “contribution margin,” which was being used to drum up investor support ahead of its ill-fated IPO.

Despite the SEC scuffle over the metric, it still appeared in several pages of WeWork’s new “90-day game plan” unveiled Friday, which the company hoped would highlight its turnaround strategy through staff cuts, an exit of non-core businesses and a refocus on leasing flexible office space to big corporate tenants.

“We will focus on the core WeWork desk business, prioritize disciplined growth with profitability, and right-size our operations to account for this long-term strategy,” the company said in its investor presentation dated Oct. 11, but released late Friday.

But the company’s debt already had drifted lower by the time reports emerged Monday that WeWork had been sounding out T-Mobile’s outspoken Chief Executive John Legere for a potential CEO role.

T-Mobile’s /zigman2/quotes/204659678/composite TMUS -1.79%  stock fell 1.63% on Monday, even as the Dow Jones Industrial Average /zigman2/quotes/210598065/realtime DJIA +0.10%   powered to yet another record close of 27,691.49.

WeWork is fresh off its roughly $10 billion bailout from key investor SoftBank Group /zigman2/quotes/207303954/delayed JP:9984 +0.16%   and said it plans to divest its stakes in Meetup, Wave Garden and other non-core businesses as part of its turnaround plan.

And “despite the noise,” the company said in the new investor presentation that it expects desk openings to reach a record high in the fourth quarter, on top of the 676,000 total desks it already had as of September.

A spokesperson for WeWork declined to comment for this story.

Read : WeWork could burn through $10 billion rescue finance in 10 months without major cost cuts, experts say

/zigman2/quotes/204659678/composite
US : U.S.: Nasdaq
$ 76.94
-1.40 -1.79%
Volume: 2.82M
Dec. 5, 2019 4:00p
P/E Ratio
19.70
Dividend Yield
N/A
Market Cap
$67.03 billion
Rev. per Employee
$832,885
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/zigman2/quotes/210598065/realtime
US : Dow Jones Global
27,677.79
+28.01 +0.10%
Volume: 219.99M
Dec. 5, 2019 5:16p
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/zigman2/quotes/207303954/delayed
JP : Japan: Tokyo
¥ 4,257.00
+7.00 +0.16%
Volume: 7.88M
Dec. 6, 2019 2:35p
P/E Ratio
9.62
Dividend Yield
1.03%
Market Cap
¥8699.20 billion
Rev. per Employee
¥126.96M
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Joy Wiltermuth is a MarketWatch markets reporter and editor based in New York.

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