Warner Bros. Discovery's Credit Rating Cut to Junk Status by S&P, Citing Weak Linear TV Outlook

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2 days ago

With the expected continued slide of Warner Bros. Discovery's linear TV business, S&P Global Ratings has cut the media company's credit rating to junk status.
On Tuesday, S&P lowered its forecast for 2025 and '26 for Warner Bros. Discovery, primarily due to the 'continued revenue and cash flow declines at its linear TV operations,' which will offset growth at the company's streaming and studio segments. The ratings agency said it now expect WBD's adjusted EBITDA to remain about $9 billion for the next three years. As a result, S&P expects the company's debt-to-equity ratio at the end of 2025 to be 4.3x, 'significantly higher than our 3.5x leverage threshold' for an investment-grade rating, and for the company's leverage to remain above 3.5x until 2027.
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As such, S&P lowered its issuer credit rating on Warner Bros. Discovery to 'BB+,' one step below its lowest investment-grade rating. According to S&P, 'BB+' is the 'highest speculative-grade by market participants.' The lower rating for WBD could make it more expensive for the company to raise or refinance debt. The two other big ratings agencies, Moody's and Fitch Ratings, maintain a rating on Warner Bros. Discovery one level up from junk status.
In its ratings-downgrade advisory, S&P said, 'We do not expect WBD to materially accelerate deleveraging through asset sales, but to instead prioritize investment in its growth businesses, which will extend the deleveraging path.'
Warner Bros. Discovery declined to comment.
Warner Bros. Discovery has reorganized the company into two divisions: one comprising its streaming business (plus HBO) and production studios, and the other composed of the rest of its cable TV portfolio. The reorg, which was completed in Q1, will 'create opportunities as we evaluate all avenues to deliver significant shareholder value,' CEO David Zaslav said in originally announcing the separation last December.
S&P said that a potential separation of WBD 'is not factored into our current rating, but any separation of the company into a growth company (Streaming & Studios) and a Global Linear Networks company would be a credit negative.'
According to its current forecast, S&P Global Ratings expects earnings before interest, taxes, depreciation, and amortization at Warner Bros. Discovery's global networks to drop 20% in 2025, to $6.5 billion. That's because of accelerating revenue declines and 'elevated content costs from newly acquired sports rights content coupled with its last year of NBA rights in 2025.' The firm expect WBD's linear TV advertising to decline 11% this year 'due to continued pressure on audience ratings and less sports than peers.'
On a positive note, Warner Bros. Discovery has seen healthy EBITDA growth at its direct-to-consumer streaming segment, with EBITDA increasing from $103 million in 2023 to $677 million in 2024. S&P said it expects further growth in EBITDA to more than $1.3 billion in 2025. However, the profitability of the streaming business is expected to 'moderate' in 2026 as Warner Bros. Discovery 'seeks to balance EBITDA growth with reinvestment in content, marketing and international growth as it launches in key markets like the U.K.,' S&P said.Best of Variety
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