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Warner Bros. Discovery Its stock witnessed a rise for the second day in a row Thursday, after it announced that it had paid off part of its debt burden this week.
The turmoil at its news outlet CNN overshadowed the financial update, announced Wednesday, in which CEO Chris Licht was ousted. Shares closed up nearly 7% on Thursday after closing up more than 8% on Wednesday. The stock is up 49% so far this year.
The media giant was dealing with a heavy debt load stemming from the merger of Warner Bros. and Discovery in 2022. The company, which ended the first quarter with $49.5 billion in debt, was in the midst of several cost-cutting initiatives like layoffs and cutting content spending.
Shares of Warner Bros. Discovery have risen in recent days after the company announced that it would pay off some of its heavy debt burden.
in Public filingWarner Bros. said: Discovery said it has paid off about $1.5 billion in debt on two of its loans. The company also announced that it has begun a cash bid of $500 million to buy any or all of its floating-rate notes, a portion of its high-interest rate debt that matures in March 2024.
That resulted in debt reduction in the second quarter of $2.05 billion, about $1 billion more than Wells Fargo’s forecast, according to Stephen Cahal, an analyst with the bank.
The analyst noted that Warner Bros. Discovery has directed that it will have approximately $930 million in free cash flow for the second quarter, after ending the first quarter with $2.6 billion in cash.
“We take deleveraging to indicate management’s confidence in generating cash and deleveraging in 2023,” Cahal wrote.
Warner Bros. Discovery executives said on recent earnings calls that the company is committed to its goal of lowering the debt-to-EBITDA leverage to less than four times.
Any meaningful cash the company generates will likely go toward paying down debt, said a person familiar with the matter who was not authorized to speak publicly. The person said that public offerings, such as the cash tender offer announced this week, are likely to serve as a way to pay off debt.
Warner Bros. Discovery also helps make the live streaming business profitable. CEO David Zaslav recently said on the company’s earnings call that the streaming business is expected to reach profitability in the United States in 2023, a year earlier than it forecast. The company recently relaunched its flagship streaming service and rebranded it as Max, combining content from HBO and a host of cable TV networks like Discovery Channel and TLC.
During the first quarter, Warner Bros. Discovery revenue of $10.7 billion, plus a net loss of $1.1 billion.
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