International office rental and shared working network WeWork, which has received several financial blows this summer, has been downgraded by Fitch Ratings.
The New York-based agency cut WeWork’s credit rating from a ‘B’ to a ‘CCC+’, noting a negative outlook for the company.
This blow hits WeWork on a difficult week, just two days after WeWork began the process of formally withdrawing its application for a listing on the stock market, citing debt and the need for a remodelled business plan.
While there is potential for the company to enter the public market later, WeWork has not given an estimated date. Additionally, it has announced the company is re-considering its plans to enter the Chinese market.
In recent years, WeWork and the larger We Company have expanded to offering living environments and educational programmes under the WeGrow, WeLive and Flatiron School brands, among others.
Regarding the company’s aspirations, Fitch said in a note that the company needed to “dramatically scale back its growth ambitions and associated overhead expense that led to its precarious liquidity position.
“In the absence of an IPO and associated senior secured debt raise, WeWork does not have sufficient funding to meet its growth plan.”
We Company, which is backed by SoftBank, lost $1.9b in 2018. WeWork has also faced several financial hits throughout the past year, leading to its junk bond currently trading at roughly 84 cents.
In late September, WeWork’s credit rating fell from B to B- in a recent evaluation by S&P, citing a negative outlook on the company’s future access to capital. This means that if its rating falls again, it will be contained within the weakest junk bond market tier.
Fitch did note that based on current cash burn trends, WeWork will have funding for another four to eight quarters. SoftBank is still due to provide WeWork with $1.7b in 2020.
These changes come days after co-founder Adam Neumann stepped down from his position as chief executive officer, moving into a non-executive role on the company’s board. Artie Minson and Sebastian Gunningham have taken on the chief executive officer role concurrently.
In a collective statement, Gunningham and Minson said: “Our core business is strong and we will be taking clear actions to balance WeWork’s high growth, profitability and unique member experience while also evaluating the optimal timing for an IPO.”