After Cold Shoulder from Israeli Investors, WeWork Turns to U.S. Bond Market

WeWork is planning to sell at least $500 million of bonds in an offering that could open as soon as Wednesday, Bloomberg reported, citing bond documents submitted by the company.

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Faced with junk bond ratings of BB- from Fitch and B+ from S&P, the New York-based provider of coworking space will be offering relatively high yields of up to 8%, according to Bloomberg.

WeWork’s turn to the U.S. bond market comes weeks after abandoning plans to raise debt in Israel markets. For months, the company had been marketing a potential bond sale to Israel’s institutional investors, during meetings and presentations that took place in Tel Aviv and New York. Ultimately, demands for financial transparency were greater than what WeWork would provide, Calcalist reported.

The bond documents reveal for the first time a measure of WeWork’s financial performance. The company reported revenue of $886 million and a cash flow of $244 million for 2017. To fund its global expansion, including in China, WeWork invested $1.5 billion last year.

Company documents show that WeWork, which was founded in 2010 by Israeli and American entrepreneurs, has 234 locations spread across 22 countries.

WeWork takes out long-term leases on office properties, redesigns them as trendy coworking spaces and parcels them out to startups as short-term rentals.

The bond filing shows that WeWork will owe $5 billion in payments on those leases through 2022 and another $13 billion for 2023 and onward.

Like other startups burning through cash as they grow at a rapid clip, WeWork revealed a riskier financial metric than debt investors typically accept. But the sheen of WeWork’s brand and the higher than typical yields could sway the market.

In Israel, WeWork found little luck. Even after the company offered investors who bought more than $50 million of bonds options to buy company equity at a $20 billion valuation, there were no takers.

Backed by a $4.4 billion investment from SoftBank Group Corp.’s Vision Fund, WeWork has been aggressively expanding over the past year.