Warner Bros. Discovery

The balance sheet is weak. WBD carries very high debt (about $39.5 billion at end-2024) from both Discovery’s leverage and the WarnerMedia acquisition. Although management has reduced debt by $21B recently), the remaining load is heavy.

Interest service is a material cash drain ($2B of interest expense in 2024)), though free cash flow (roughly $4.4B in 2024) comfortably covers interest. The company is investment-grade, but any earnings shortfall could stress credit metrics. Liquidity (cash $5.3B) plus revolver) is modest relative to debt.

On recovery: There are no bankruptcy concerns today, but there is little cushion for a downturn. We mark this down significantly – a financial crisis or prolonged industry slump could strain WBD more than healthier competitors.