Fitch, Moody’s Join S&P Global in Downgrading Warner Bros. Discovery

Credit rating firms Fitch and Moody’s have joined S&P Global in downgrading Warner Bros. Discovery after it revealed plans to split its Global Networks and Streaming & Studios businesses into two separate companies in mid-2026.

Fitch downgraded the media giant’s long-term issuer default ratings from BBB- to BB+, meaning it is no longer investment grade, and its short-term issuer default ratings from F3 to B, reflecting an “uncertain capacity for timely payment of financial commitments.” It also downgraded WarnerMedia Holdings’ senior unsecured debt from BBB- to BB+ with a recovery rating of RR4 and WarnerMedia’s senior unsecured debt from BB+ to BB with a recovery rating of RR5.

The firm said the move was because WBD would be “smaller and less diversified in a secularly declining industry” post-transaction and would have elevated leverage. “Depending on the final capital structure, a multi-notch downgrade is possible,” it added.

Fitch also put WBD on a negative credit watch, reflecting uncertainty about the company’s future capital structure and deployment priorities. It will resolve that once further separation details are available.

Pre-separation, it expects WBD’s total revenue to decline in the low single-digits as linear network declines continue, partially offset by increases in direct-to-consumer revenue. It expects annual free cash flow to remain consistent between the high $3 billion to low $5 billion range.

Meanwhile, Moody’s downgraded WBD’s backed senior unsecured notes to Ba1 from Baa3, meaning they are no longer investment grade, and placed the ratings on review for another potential downgrade.

“The downgrade reflects WBD’s persistent operating challenges and a change in its financial policies to include secured debt in its capital structure pre- and post-separation,” the firm explained. “Given the revenue and profitability pressures caused by the declining linear television business, uncertainty as to the timing of future deleveraging and the financial policy change, we viewed the credit profile as inconsistent with an investment grade rating.”

Pre-separation, Moody’s expects WBD to continue generating upwards of $4 billion of free cash flow in 2025 and 2026.

Following the split, the Studios & Streaming business will include Warner Bros. Television Group, Warner Bros. Motion Picture Group, DC Studios, HBO, HBO Max, Warner Bros. Games, Tours, Retail and Experiences, as well as studio production facilities in Burbank and Leavesden.

Executives have said that the streaming business is on track to generate at least $1.3 billion in profit by the end of 2025 and reach at least 150 million streaming subscribers by the end of 2026, which it plans to achieve through a combination of expanding Max internationally, strategic distribution partnerships and driving higher penetration of its ad-supported tier. Meanwhile, the studios business is targeting at least $3 billion in annual profit, though a specific timeline for achieving that is unclear.

Global Networks will include CNN, TNT Sports in the U.S., Discovery, top free-to-air channels across Europe, Discovery+ and Bleacher Report (B/R). It will retain a 20% stake in the studios and streaming business to help the company deleverage and is expected to take the majority of WBD’s roughly $37 billion in gross debt.

Shares of Warner Bros. Discovery have fallen around 50% since the 2022 merger.

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