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S&P Downgrades Warner Bros Outlook To Negative (Friday)

COMMUNICATIONS

Baa3/BBB-[N]/BBB- Spreads ~ 1bp wider into close

  • Action cited weak H1 performance, primarily on revenue and CF declines at its linear TV ops.
  • 2024 revenue forecast downgraded to -1.6% from 2.6%, with EBITDA expected to decline.
  • Leverage outlook worse—Leverage of 4.7x at Q2 seen at 4.4x in 2024 and 3.8x in 2025, against upside/downside thresholds of 3.5x. Asset sale opportunities noted as an upside.
  • Potential loss of NBA rights in 2025 could further pressure revenue and EBITDA, complicating de-leveraging efforts beyond 2025.
  • WBD’s FOCF remains robust and is seen at USD 4.4bn in 2024 with FOCF to debt seen stable at around 10% against a downgrade threshold of sustainably <10%.
  • Downgrade thresholds could be tightened (or the credit downgraded) if business trends weaken or the ability to monetise content declines.
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