Warner Bros. Discovery suffered another financial setback this week when a leading credit rating agency downgraded the company’s credit rating from BBB- to BB+. This new status moves the company into “junk” investment territory, below an investment-grade rating, signifying a higher degree of default risk.
S&P Global cited the company’s elevated debt levels and declining performance in its linear cable business. The credit rating downgrade is another indication of the market’s negative forecast for WBD.
S&P analysts also reported on the impact of WBD’s rumored plans to divide into two companies, with its studio & streaming division separating from its linear cable division. S&P’s analysis showed that this would be a “credit negative” event, leaving the resulting companies with a high level of debt.
WBD has been struggling to manage debt since Warner Bros. and Discover merged in 2022 to become the current media giant. Under pressure to pay down the company’s $40B in debt, the company has made several controversial decisions over the past two years, including cancelling the theatrical releases of several completed films to be able to write off their production costs and not spending the money required to extend its broadcast rights to the NBA.
Despite these financial moves, S&P projects little improvement to WBD’s debt because of the steep decline in its linear cable business, with 2026 revenue expected to drop by another 20%. Nonetheless, the industry seems to be preparing for WBD to go forward with a split, with Allen Media Group announcing the hiring of four former WBD ad sales directors.
Allen Media Group has made multiple attempts to acquire cable assets, and these hires hint at their interest in running WBD’s cable business after a split.
