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warner bros discovery shares rose for a second straight day on Thursday after it said it had paid off some of its debt this week.
Wednesday’s financial update was overshadowed by turmoil at news outlet CNN following the dismissal of CEO Chris Licht. After closing more than 8% higher on Wednesday, the stock closed nearly 7% higher on Thursday. The stock is up 49% since the beginning of the year.
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The media giant is grappling with massive debt stemming from the 2022 merger of Warner Bros. and Discovery. The company, which ended the first quarter with $49.5 billion in debt, is in the midst of a range of cost-cutting measures, including job cuts and reduced content spending.
Shares of Warner Bros. Discovery have risen in recent days after the company announced it would pay off some of its heavy debt.
and public application, Warner Bros. Discovery said it has repaid about $1.5 billion on two loans. The company also announced that it has launched a $500 million cash tender offer to purchase some or all of its floating rate notes, which are part of its high-interest debt maturing in March 2024.
That resulted in $2.05 billion in debt relief in the second quarter, roughly $1 billion more than Wells Fargo & Co.’s estimate, according to analyst Steven Cahal.
The analyst notes that Warner Bros. Discovery expects free cash flow to be about $930 million in the second quarter after ending the first quarter with $2.6 billion in cash. bottom.
“We take the debt reduction as an indication of management’s confidence in generating cash and deleveraging in 2023,” Kahor wrote.
Warner Bros. Discovery executives said on a recent earnings call that the company is sticking to its goal of lowering its debt-to-EBITDA leverage to below four times.
Any meaningful cash generated by the company will likely be used to pay down debt, according to the people, who were not authorized to speak publicly. Public offerings, such as the cash tender offer announced this week, are likely to be a way to pay down debt, the people said.
Warner Bros. Discovery is also working to monetize its streaming business. CEO David Zaslav recently said at the company’s earnings call that he expects the streaming business to reach profitability in the U.S. in 2023, a year earlier than expected. The company recently relaunched and rebranded its flagship streaming service as Max, combining content from HBO with a portfolio of cable TV networks like Discovery Channel and his TLC.
In the first quarter, Warner Bros. Discovery reported revenue of $10.7 billion and a net loss of $1.1 billion.
