WeWork cut deeper into junk territory due to 'precarious liquidity position'
Fitch Ratings cut WeWork’s credit rating deeper into junk territory on Tuesday evening amid worries about its "precarious liquidity position.”
The two-notch downgrade to CCC+ comes one day after the office-sharing company pulled the plug on its initial public offering.
“The downgrade and Outlook reflect WeWork's uncertain liquidity profile in the absence of its earlier plan to raise at least $3 billion in an IPO plus $4 billion in senior secured debt along with $2 billion in letter of credit capacity,” Fitch said, while also assigning a negative outlook to the company.
Wednesday’s downgrade was the second to hit WeWork in less than a week, putting further pressure on the company’s ability to access cash. S&P Global Ratings last week cut its rating deeper into junk territory, citing uncertainty around the company’s ability to raise cash and “subpar governance practices.”
“Fitch sees the potential for WeWork's business and market position to be harmed by customers that hesitate to sign membership agreements, particularly enterprises," the ratings agency said. "This is in addition to the company's potential retrenchment from the leasing market, particularly in gateway cities where it has become one of the largest private tenants, reducing the relative attractiveness of a WeWork lease but also potentially reducing landlord incentive to invest in capital improvements going forward."
WeWork on Monday withdrew its plans for an IPO, saying it would focus on its business instead.
“We have decided to postpone our IPO to focus on our core business, the fundamentals of which remain strong,” co-CEOs Artie Minson and Sebastian Gunningham said in a press release Monday.
“We are as committed as ever to serving our members, enterprise customers, landlord partners, employees and shareholders. We have every intention to operate WeWork as a public company and look forward to revisiting the public equity markets in the future.”
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On Sept. 24, founder Adam Neumann resigned as CEO amid mounting concerns over corporate governance standards, which gave his shares 20 times the voting power of ordinary shareholders’. He remains at the company as non-executive chairman.