Breakingviews - TV-burdened WBD will struggle to cut the cord
NEW YORK, June 5 (Reuters Breakingviews) - David Zaslav's fleece vest provides limited protection from the chilling effect of his corporate balance sheet. The Warner Bros Discovery (WBD.O), opens new tab boss is trying to eject the collapsing traditional TV business, but $34 billion of mostly merger-related net debt complicates the plan. The time to split was yesterday.
WBD, a $24 billion media conglomerate spanning CNN to Looney Tunes, flagged the possibility of a breakup last year when it restructured into two operating divisions: one that houses cable networks such as Discovery and another for its HBO streaming service and Warner Bros. movie studio. The step laid the groundwork to follow a similar path as cable operator Comcast (CMCSA.O), opens new tab, where CEO Brian Roberts outlined plans to move some TV assets into a standalone company.
Financial engineering prospects keep getting tougher by the day. S&P Global, alarmed by the relentless decline in broadcasting and its drag on other businesses, downgraded, opens new tab WBD's credit rating to junk status. The company's stock price also has plummeted from a peak of about $77 a share in March 2021 to around $10.
Zaslav is confronted with a conundrum. The spinoff cannot be sent packing with too much more debt than equity, which would tempt friction with bondholders. At 5 times estimated 2026 EBITDA of $5.5 billion, according to Visible Alpha, and if general expenses are evenly divided, the TV enterprise would be independently worth $28 billion.
With 60% debt, the same proportion as now, it would be carrying $14 billion. On that basis, WBD's remaining $20 billion of net borrowing stays with streaming and the studio. Assume that business is valued at half of where Netflix (NFLX.O), opens new tab trades, or 16 times next year's EBITDA, and the assets are worth $56 billion.
On paper at least, the math suggests WBD's equity would be worth twice as much as today once cleaved in two. And yet in that scenario, the HBO side also gets stuck with debt equivalent to 5 times its $3.5 billion in projected 2026 EBITDA. That amount of leverage – 30% higher than at the parent now – would potentially impede its ability to compete effectively by hamstringing investment in new programs and technology.
These discouraging figures increase the chances of both companies getting frosty receptions from investors. Zaslav may want to warm up to the idea of selling the TV business instead.
Follow Jennifer Saba on Bluesky, opens new tab and LinkedIn, opens new tab.
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Reuters
21 minutes ago
- Reuters
China's Li says US-China reach framework on trade, will report back to leaders
LONDON, June 10 (Reuters) - China's Vice Commerce Minister Li Chenggang said on Tuesday that the Chinese and the U.S. negotiating teams had agreed a framework on trade after two days of talks, and would take that back to their leaders. "The two sides have, in principle, reached a framework for implementing the consensus reached by the two heads of state during the phone call on June 5th and the consensus reached at the Geneva meeting," Li told reporters.
Reuters
an hour ago
- Reuters
Space and defense tech firm Voyager raises $382.8 million in US IPO
June 10 (Reuters) - Voyager Technologies raised $382.8 million in its U.S. initial public offering, the space and defense tech company said on Tuesday, amid a global rush to amp up military spending. The company, which provides mission-critical space and defense technology solutions, along with some investors sold roughly 12.35 million shares at $31 per share, above its marketed range of $26 to $29. The offering is the latest in recent weeks as the U.S. IPO market regained its footing after being restricted by tariff-driven volatility. The Denver, Colorado–based company's IPO comes as President Donald Trump's administration looks to sharply increase spending on defense and space projects. Trump last month selected a design for his $175 billion Golden Dome project, a next-generation U.S. missile defense shield. The stock will trade on the New York Stock Exchange on Wednesday under the symbol "VOYG". Morgan Stanley and J.P. Morgan are the lead underwriters on the listing.
Reuters
an hour ago
- Reuters
Venture Global withdraws application to build Delta LNG plant, filing shows
HOUSTON, June 10 (Reuters) - Venture Global (VG.N), opens new tab asked U.S. federal regulators to withdraw its application to build its proposed 24 million metric tons per annum Delta LNG export facility in Louisiana, saying it can build its proposed Plaquemines expansion project faster, according to a filing on Tuesday. Venture Global is the second largest U.S. liquefied natural gas exporter and has been able to build new LNG plants quicker than any other company by manufacturing modular parts outside of the U.S. and then putting them together on site. Pursuing the Delta LNG Project would not be the best use of its corporate resources, Venture Global said on Tuesday in a filing to the Federal Energy Regulatory Commission. It said it has instead decided to focus on the Plaquemines Expansion Project which the commission accepted in its pre-filing review process on April 4, Venture Global said. "Venture Global LNG expects that, upon completion, the Plaquemines Expansion Project will produce approximately the same quantities of LNG as the proposed Delta LNG Project, but on a faster schedule," the company said. The Plaquemines expansion project will be 18 million metric tons per annum. Venture Global plans to keep the land it had set aside for Delta, should the market support the revival of the project, the company said.
