Credit rating agency Fitch downgraded WeWork's credit rating to speculative territory after the real estate company withdrew its plans to proceed with an initial public offering.
In an announcement issued Tuesday in New York, Fitch Ratings said it was cutting WeWork's credit rating by two levels to triple C more with a negative outlook than B previously.
WeWork said on Monday it was formally withdrawing its stock quote, signaling the need to reduce its losses and renew business before making another attempt to float shares in the public market.
The IPO began with hopes of a $ 47 billion valuation and ended with the downgrade of CEO and founder Adam Neumann. The money-hungry WeWork wanted to raise between $ 3 billion and $ 4 billion, which would have released a $ 6 billion debt package from banks that have subscribed to the IPO process.
Unlisted in the stock market, Fitch said in a statement that the company "would dramatically reduce its growth ambitions and the associated overhead that led to its precarious liquidity position."
"In the absence of an IPO and associated increase in secured debt, WeWork does not have sufficient funding to meet its growth plan," said Fitch's statement. The rating agency expects WeWork to reduce openings in new locations and that its position in the market could be damaged if corporate customers hesitate to sign new contracts due to uncertainty about the company's current path.
It was reported on Tuesday that the company was rethinking its expansion plans in China.
WeWork had $ 2.5 billion in unrestricted cash at the end of June and owes another $ 1.7 billion to Softbank, its largest investor, by 2020, Fitch notes. Based on current cash-burning trends, WeWork has other financing for four to eight quarters, the rating agency added.
Co-executives Artie Minson and Sebastian Gunningham are expected to announce sharp layoffs at the company, which Fitch said would lead to "material cash restructurings."