Summary
Warner Bros. Discovery, Inc. (WBD) filed an 8-K on June 9, 2021, detailing the entry into a new $2.5 billion multicurrency revolving Credit Agreement by Discovery Communications, LLC (DCL). This new facility replaces an existing agreement and provides significant flexibility for general corporate purposes and the repayment of existing obligations. A key feature is the potential to increase the facility by an additional $3.5 billion, bringing the total to $6.0 billion, upon the closing of the previously announced combination with AT&T's WarnerMedia business. This expansion is crucial for supporting the financial needs of the combined entity as it integrates operations and pursues growth strategies. The new Credit Agreement, which matures in June 2026 with extension options, is unsecured and guaranteed by Discovery and Scripps Networks Interactive, Inc., with the expectation of a guarantee from the WarnerMedia holding company post-combination. The agreement includes financial covenants such as a minimum consolidated interest coverage ratio and a maximum consolidated leverage ratio, which will be tested against the combined entity's performance. Notably, the calculation of EBITDA for covenant purposes allows for certain add-backs related to direct-to-consumer platform implementation and the 2020 Summer Olympics coverage, providing some flexibility during periods of significant strategic investment and unusual events.
Key Highlights
- 1Execution of a new $2.5 billion multicurrency revolving Credit Agreement by Discovery Communications, LLC (DCL), replacing a prior agreement.
- 2Potential to increase the credit facility by an additional $3.5 billion (to a total of $6.0 billion) upon the closing of the WarnerMedia combination.
- 3Facility is unsecured and guaranteed by Discovery and Scripps, with a planned guarantee from the WarnerMedia holding company post-combination.
- 4Maturity date of June 9, 2026, with options to extend for an additional 364 days (exercisable twice).
- 5Introduction of new financial covenants, including a minimum interest coverage ratio and a tiered maximum leverage ratio, applicable to the combined entity.
- 6Permitted add-backs to EBITDA for covenant calculations related to direct-to-consumer platform implementation and 2020 Summer Olympics coverage, subject to caps and time limitations.
- 7The new credit facility provides flexibility for general corporate purposes and repayment of existing debt.