Warner Bros. Split Puts Bondholders in a Bind
The long-awaited plan to separate cable TV and streaming raises a tricky question: Who gets stuck with all the debt?
Breaking up is hard to do.
Photographer: Valerie Macon/AFP via Getty Images
These days the real art of television and film lies in repackaging existing formats, presenting them as something new and getting consumers to pay for it all. Warner Bros Discovery Inc. is attempting this at a grand scale with its planned separation into businesses focused first on streaming and studios, and second on legacy television. It’s a sequel that pits bondholders and shareholders against each other.
Liberated as a focused company, Warner’s streaming and studio business promises to fetch a higher stock-market valuation as it attracts investors otherwise deterred by the current company’s ties to old media. The cable television outfit, whose assets include CNN, TNT, TBS and Discovery, is likely to take on a lot of the company’s debt. True, the cable industry has been losing audience to streaming upstarts, but its sizeable cash flows can still support a little extra debt leverage. Warner’s cable business could generate $6.1 billion in earnings before interest, tax, depreciation and amortization in 2025, Bloomberg Intelligence forecasts. That’s twice what the studio business is expected to bring in.