LIVE MARKETS-Gimme Credit flags big debt risks in Netflix's Warner Bros Discovery deal
Welcome to the home for real-time coverage of markets brought to you by Reuters reporters. You can share your thoughts with us at markets.research@thomsonreuters.com
GIMME CREDIT FLAGS BIG DEBT RISKS IN NETFLIX'S WARNER BROS DISCOVERY DEAL
Netflix NFLX.O is stretching its balance sheet with the $72 billion bid for Warner Bros Discovery WBD.O, independent corporate-bond research firm Gimme Credit said, as it cut its recommendation on the company's debt to "underperform."
Last week, Netflix agreed to buy Warner Bros Discovery's studios and streaming arm, a deal which was later swiftly challenged by a $108.4 billion hostile bid from Paramount Skydance PSKY.O.
Netflix offered nearly $28 per share of which approximately $60 billion will be in cash. The company will also assume nearly $11 billion of debt.
Given that the acquired assets generate about $3 billion of EBITDA annually, the purchase price represents a stiff multiple of more than 25 times, said Dave Novosel, senior analyst at Gimme Credit.
"The deep Warner library of films and TV shows and the studio assets are incredibly attractive, but that price strikes us as rich," Novosel added.
He noted that even after factoring in $2–$3 billion in projected synergies, the effective multiple would still be ~14 times, and those savings would take three years to realize.
The firm said Netflix will take on $50 billion in new debt for the Warner deal, lifting its total borrowings to about $75 billion and making its debt load several times larger than its annual earnings. It warns that continued share buybacks will slow debt reduction, leaving Netflix highly leveraged for years.
Even if the deal closes, Novosel sees near-term credit impact as "decidedly negative."
"Netflix has been growing tremendously on its own and the price is huge. The history of media mergers is littered with failed marriages".
(Joel Jose)
EARLIER ON LIVE MARKETS:
STAPLES STUCK: HSBC WARNS 2026 WON'T BE A PICNIC FOR CONSUMER GIANTS CLICK HERE
HIGH HO, SILVER! CLICK HERE
BELLIES PINCHED AS CENTRAL BANK EXPECTATIONS SHIFT CLICK HERE
ONE BITCOIN BULL HAS CUT THEIR FORECAST AS "COLD BREEZE" BLOWS CLICK HERE
STOXX DIPS CLICK HERE
BEFORE THE BELL: EUROPE DIPS ON FED DAY; DELIVERY HERO SHINES CLICK HERE
ONE LAST HURDLE REMAINS FOR THE YEAR CLICK HERE
Related Articles
Global Flight to Safety Intensifies as Gold, Silver, and Platinum Hit New Highs — ‘Currency Wars’ Author Predicts $10,000 Gold and $200 Silver
TradingKey - Since the start of 2025, silver, which offers both investment attributes and industrial utility, has surged by approximately 150%.
How Does Santa Claus Manage the Global Economy? Has the 'Santa Claus Rally' Arrived?
TradingKey - This Christmas, Santa Claus seems to have delivered a good gift to the U.S. market: total holiday retail sales are projected to exceed $1 trillion for the first time. The "Santa Claus rally" materialized as expected for U.S. stocks, with the S&P 500 index hitting a new closing high on C
TradingKey 2025 Markets Recap & Outlook | Gold Records Its Best Performance in Half a Century, Wall Street Predicts $5,000 Breach in 2026
TradingKey - Amid escalating global economic uncertainty, gold is experiencing its best performance since 1979, achieving its largest increase in 46 years. As 2025 draws to a close, major Wall Street institutions have confirmed gold's status as the best safe-haven asset, with a consensus forming tha
European Central Bank 2026 Monetary Policy Outlook And Euro Exchange Rate 2026 Trend How?
TradingKey - The Federal Reserve has initiated an interest rate cut cycle, implementing its third consecutive rate cut since September this year, while the European Central Bank (ECB) has maintained a wait-and-see approach, keeping interest rates unchanged at 2.15% since July this year. In 2026, the Federal Reserve will maintain an accommodative monetary policy. If the European Central Bank maintains its current stance, what will be the future direction of the Euro exchange rate?
TradingKey 2025 Markets Recap & Outlook | Global Central Banks 2026 amid Post‑Easing Recovery and Diverging Paths
TradingKey - In 2025, major global central banks will largely maintain an accommodative stance, but the policy pace will decelerate notably. As the easing cycle draws to a close, how will global monetary policy evolve?
