Fitch downgrades WeWork after aborted IPO leaves financing hole
Global credit rating agency Fitch Ratings on Tuesday downgraded WeWork's credit rating by two notches to "CCC+", putting the Softbank-backed office-sharing firm deep into junk territory a day after it abandoned an initial public offering (IPO).
WeWork, whose parent We Company lost 1.9 billion U.S. dollars in 2018, had hoped to raise at least three billion U.S. dollars in the abandoned IPO and borrow a further six billion U.S. dollars in a loan from banks that was contingent on the listing.
"In the absence of an IPO and associated senior secured debt raise, WeWork does not have sufficient funding to meet its growth plan," Fitch wrote in a note.
Additionally, Fitch warned that there is a potential for WeWork's customers, particularly big companies, to "hesitate to sign membership agreements" given the current flux. It said there was no evidence of this yet.
WeWork's rating outlook is also negative, Fitch added.
Monday's decision to scrap the IPO marked the conclusion of a tumultuous few weeks for WeWork, which failed to excite investors who raised concerns about its ballooning losses and a business model that involves taking long-term leases and renting out spaces for a short term.
Fellow ratings agency Standard & Poor's last week downgraded WeWork to "B-" from "B".
Both "CCC+"and "B-" are junk bond ratings reserved for corporate borrowers judged to be higher risk to lenders.