Warner Bros Discovery (WBD) bondholders overwhelmingly approved a consent solicitation to remove restrictive covenants and enable the company’s planned split into two standalone entities, separating its studios and HBO Max streaming service from its legacy cable networks.
Bondholders backed a debt restructuring that includes a buyback of nearly $18 billion of the $37 billion they hold, despite recent downgrades of Warner Bros Discovery’s bonds to junk status by Fitch, Moody’s and S&P.
Market Overview:- Consent vote secures approval from virtually all bondholder classes to execute the corporate split.
- Plan calls for repurchasing almost half of the company’s $37 billion debt after the WarnerMedia–Discovery merger.
- Long-dated bond prices dipped on relief that the restructuring can proceed under the new capital structure.
- Separation creates a lean streaming/studio entity and a standalone cable network business.
- Cable-unit bondholders face subordination risk as unsecured debt loses collateral protections.
- Up to 99% of certain bond groups voted in favor, reflecting broad investor support despite complexity.
- Bond tender deadline set for June 23 to finalize the debt buyback and covenant amendments.
- Corporate split subject to regulatory sign-off and detailed implementation planning.
- Credit markets will monitor refinancing options and liquidity needs post-separation.
- Bondholder approval of the consent solicitation removes key covenant restrictions, allowing Warner Bros Discovery to proceed with its strategic split and unlock value for both shareholders and creditors.
- The separation creates a focused, agile studio and streaming business, better positioned to compete in a rapidly evolving media landscape and capitalize on growth opportunities in digital entertainment.
- Repurchasing nearly $18 billion of debt significantly reduces the company’s leverage, improves its balance sheet, and enhances long-term financial flexibility for both new entities.
- The restructuring enables each standalone company to pursue tailored capital structures and investment strategies, potentially attracting new investors and partners aligned with their unique business models.
- Majority support from nearly all bondholder classes demonstrates strong creditor confidence in management’s plan, reducing the risk of legal challenges and execution delays.
- By proactively addressing debt and operational complexity, Warner Bros Discovery may set a positive precedent for other media conglomerates navigating industry disruption and capital market pressures.
- Despite bondholder approval, the downgrade of Warner notes to junk status by Fitch, Moody’s, and S&P raises concerns about higher borrowing costs and reduced access to capital markets for both post-split entities.
- Unsecured bondholders of the cable network arm face increased subordination risk and lack collateral protection, potentially leading to losses in a downturn or restructuring scenario.
- The cable network business may struggle under a heavier debt load and declining legacy revenues, while the studio and streaming division faces intense competition and uncertain profitability.
- Forced selling by investment-grade funds and lingering credit market skepticism could keep bond prices suppressed and increase volatility around the split and debt buyback process.
- Legal challenges from disgruntled creditors over priority rights or the carve-out structure could delay implementation or result in costly litigation.
- Regulatory review and execution risks remain, and any setbacks could undermine market confidence in the company’s ability to deliver on its restructuring and operational goals.
Analysts caution that the standalone cable network business may struggle under a heavier debt burden, while the nimble streaming and studio arm gains strategic flexibility and growth potential.
With bondholder consent secured, Warner Bros Discovery is poised to execute its long-planned separation, triggering a critical test of the new entities’ credit profiles and operational prospects.
