S&P downgrades Warner Bros bonds deeper into junk status

S&P Global Ratings cut Warner Bros Discovery’s unsecured bond ratings deeper into junk status after the media company announced it was splitting up, and said that it’s reviewing downgrading other ratings of the company.

The bond grader said it downgraded Warner Bros Discovery’s unsecured notes to BB, the second-highest junk rating, from BB+, according to a statement on Monday. 

S&P cut the notes after the company said it was refinancing more than US$14 billion of its unsecured notes using US$17.5 billion of secured bridge financing as part of its breakup, effectively putting new creditors ahead of unsecured noteholders.

“The addition of the new secured debt will negatively affect the recovery prospects for the company’s unsecured debt,” S&P analysts wrote in the statement. 

Warner Bros Discovery has about US$35.5 billion of outstanding bonds, excluding debt due this year, it said in a presentation on Monday. 

The company said on Monday that it’s splitting itself up, unshackling its fast-growing streaming business from the struggling legacy media channels and setting up two independent companies that could pursue deals on their own. BLOOMBERG