WeWork shuts a New York office-share space because of coronavirus
WeWork has temporarily closed two floors of a building the office-sharing company occupies in New York City after a worker tested positive for coronavirus.
The employee worked at WeWork subsidiary Meetup, which had a full floor of the building in midtown Manhattan. Another floor in the building that was used as common space for both WeWork employees and the company's office-sharing clients also was closed.
It is the second building to be shuttered temporarily in New York because of the coronavirus and the fifth of WeWork's properties to be closed worldwide. WeWork temporarily closed an office in Seattle last week, although it has since re-opened.
The coronavirus concerns are the latest woes for a company that until recently was considered one of the world's hottest startups, with an estimated value of nearly $50 billion. But the future of WeWork and the coworking economy it represented has been in doubt since last fall, when the company called off a planned initial public offering and dumped founder and former CEO Adam Neumann.
The spread of the coronavirus in the U.S., which raises questions about the wisdom of open office spaces, could deal another painful blow to WeWork. The company's business model is predicated on convincing people to work nearly elbow-to-elbow with strangers, and even to share a beer with them in WeWork's famous office happy hours.
In the past week, WeWork's lenders appear to have grown increasingly nervous that the company may not be able to fully repay a $675 million debt deal issued in April 2018. The price of the bonds tied to that deal have dropped 20% in the past three weeks to an all-time low — a big move for a bond and a sign of trouble for WeWork. The average corporate bond has dropped just 5.5% in the past month.
WeWork's bonds now trade at 0.71, according to FactSet. That implies bondholders now expect to recoup only 71% of what was lent to the company in April.
WeWork does have until mid-2025 to come up with the cash to pay off that debt deal, and must pay $53 million a year in interest payments while it does so. But the drop in bond prices implies that WeWork would have to offer new investors as much as 16% a year in interest in order to borrow new cash. That might not be something WeWork could afford.
It's not clear just how much cash WeWork has left. The company declined to provide an update to CBS MoneyWatch on its financial condition. It also would not say whether the coronavirus has affected use of its coworking spaces.
WeWork has yet to report its results for the last three months of 2019, as it is required to do for bondholders. WeWork had $1.2 billion in unrestricted cash at the end of September, after losing $1.3 billion in the prior three months.
In an October bailout, WeWork investor Softbank provided the company with about $3.5 billion in new cash. But it also added about $2 billion in debt on top of $1.3 billion it already owed to prior lenders.