Things just went from bad to worse for WeWork (and Softbank) as the over-levered office-rental company sees its debt pummeled back below a critical level as its IPO flails.

WeWork's 2025 Bonds have plunged back below par for the first time since filing for its IPO - which Softbank is now reportedly urging them to pull...

Source: Bloomberg

This could be a problem going forward as Bloomberg reports that while WeWork is aiming for investment-grade status eventually, the office-rental company plans to rely on junk bonds for funding for the foreseeable future, a WeWork executive said in a meeting with analysts.

And that cost of funding just soared, now trading back at almost 700bps over Treasuries...

Source: Bloomberg

WeWork has lined up a $6 billion credit line that is contingent on it raising at least $3 billion in its IPO, according to the offering prospectus by its parent, the We Co.

"Its rapidly growing footprint burns cash, so traditional credit metrics will view the company poorly," said Arnold Kakuda, a senior credit analyst with Bloomberg Intelligence.

"WeWork would need to exhibit stable profits, before it can be seriously considered to be an investment-grade company."

As Bloomberg recently noted, "anyone weighing whether to buy shares in WeWork’s IPO cannot ignore the fact that the company will have to find $47 billion from somewhere in coming years to meet its contractual obligations – including about $10 billion in just the next five years. Right now, its own very negative cash flows won’t cut it."