WeWork has “minimal headroom” to cope with management problems or an economic slowdown despite last week’s rescue by SoftBank, Fitch Ratings has warned.
Last week, SoftBank agreed to provide the We Company, WeWork’s parent group, with $5bn in new debt, as well as “accelerating” an existing funding line of $1.5bn. SoftBank will also launch a tender offer for existing shareholders of up to $3bn.
“There is minimal headroom for execution challenges or a broader slowdown… With the accelerated $1.5bn, WeWork should be able to meet its operational needs in the current quarter, but would still face insolvency should the financing transaction not go through, which we view as a lower probability event at this point,” said Fitch.
However, the ratings agency added that the $1.5bn “alleviates near term liquidity pressures”.
It also said that the $5bn was “the effective minimum needed to fund WeWork’s existing operations, restructuring and opening of leases entered into in anticipation of the scuttled IPO”.
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