Pressure on battered offices giant WeWork mounted again on Wednesday after an influential ratings agency downgraded the firm’s debt further into junk territory and warned on growth prospects.
Fitch Ratings downgraded the workspace provider and its parent WeCo from a B rating to CCC+ just a day after it shelved plans for a New York float.
That followed a tumultuous September that saw WeWork’s chief Adam Neumann ousted and investor scepticism over the high valuation increase.
Fitch said 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 it anticipates WeWork, known for its free beer and hipster start-up tenants, “will dramatically scale back its growth ambitions and associated overhead expense that led to its precarious liquidity position”.
It also warned there is “potential for WeWork’s business and market position to be harmed by customers that hesitate to sign membership agreements, particularly enterprises”.
WeWork, which leases a number of properties in London, was previously valued at $47 billion but doubts about the firm’s business model have surfaced.
Investor worries were raised in August when WeWork filed a prospectus revealing it had racked up billions in losses and was burning through cash.
