Moody's downgraded Warner Bros. Discovery to junk status due to split plan struggles

From Yahoo Finance: 2025-06-11 09:38:00

Warner Bros. Discovery Inc. was downgraded to junk by Moody’s Ratings, shifting from investment grade to Ba1, the highest junk tier. The company’s split into two independent entities complicates discussions with bondholders, who must decide whether to sell back securities and lose key safeguards on remaining notes.

With the downgrade, $31 billion of Warner Bros. Discovery’s debt is no longer eligible for Bloomberg’s high-grade index. The company is expected to become one of the largest issuers of junk bonds, but the exact amount of debt migrating to the high-yield index remains unclear due to ongoing bond buybacks.

Moody’s rating action follows a similar downgrade from S&P Global Ratings in May, reflecting Warner Bros. Discovery’s operational challenges and debt structure changes. The company plans to refinance over $14 billion of unsecured notes through secured bridge financing, prioritizing new creditors over unsecured noteholders.

Governance changes and financial policy shifts were cited as key factors in the rating downgrade by Moody’s. The buyback plan poses tough choices for investors, who must surrender safeguards on other bonds if they opt to sell back their notes. The company’s 2022 formation led to a $30 billion debt sale, one of the largest in history.

Read more: Warner Bros. Cut to Junk by Moody’s After Split Plan