Fitch Ratings has downgraded WeWork Cos. to CCC from CCC+, citing recent negative metrics pulling the company down, and the prospect of a weaker economy next year. Default for the coworking company is a real possibility, according to Fitch.

Fitch predicts WeWork would be a going concern should it go bankrupt, and it would be reorganized rather than liquidated. Under a recovery scenario, Fitch expects "significant defaults" on lease payments.

The company also downgraded the company’s senior unsecured bonds a single notch from CCC- to CC.

In the Fitch scheme of ratings, CCC is a substantial credit risk, with default "a real possibility," while CC means that "default of some kind appears probable." One more notch below CC and the process of default has begun.

"Fitch is encouraged by meaningful improvements in operating losses during 2022, but the current estimates for 2022 EBITDA in the range of negative $435M to $455M indicates the company still faces significant challenges," the ratings agency said in a statement.

The downgrades also come after WeWork's Q3 2022 earnings fell short of Wall Street’s expectations, Bloomberg reports. The company lost $629M in Q3, much more than the consensus estimate of a $367M loss. Fitch noted while more workers have come back to the company's offices, a return to pre-pandemic numbers will not be easy.

"WeWork is targeting a return to pre-pandemic occupancy levels of low- to mid-80% range, but achieving this goal in 2023 will be challenging and will likely require exiting additional low-performing locations," Fitch said.