Hollywood film and television giant Warner Bros. Discovery (WBD.US) has been downgraded again, with S&P lowering its credit rating to "BB junk level".

One of the three major credit rating agencies in the world, S&P Global, Inc. ratings (S&P Global Ratings) further downgraded the unsecured bond rating issued by Hollywood film giant Warner Bros. Discovery (WBD.US) to a deeper "junk" rating after the company announced its plan to split, and stated that it is evaluating a downgrade of the company's other credit ratings. The rating agency stated in a statement on Monday that it has downgraded Warner Bros. Discovery's unsecured bond rating from "BB+" to "BB", which is the second highest level in the junk rating category, lower than the agency's previous highest junk rating of "BB+", meaning that Warner Bros. Discovery's bond rating is even worse than most junk bonds in the junk rating category. Warner Bros. Discovery stated that it will use $17.5 billion of secured bridge financing during the business segment split process to refinance over $14 billion of unsecured bonds, which effectively prioritizes repayment to the new creditors over the unsecured bondholders, leading S&P to downgrade the credit rating of this group of bonds. "The addition of secured debt will significantly weaken the prospects for the recovery of the company's unsecured debt," analysts from S&P wrote in a statement. In a presentation on Monday, Warner Bros. Discovery stated that, excluding the debt maturing this year, the company still has about $35.5 billion in outstanding bonds. The company also announced on the same day that it will be splitting its business segments, officially breaking away the fast-growing streaming business from the struggling traditional TV media business channels, setting up two new companies that can independently engage in transactions and revenue generation. The "junk" credit rating given by S&P implies that the bonds issued by the company are sensitive to changes in economic or financial conditions, increasing the risk of default and having significant speculative characteristics. Generally, bonds with junk ratings (or Junk Bonds), also known as high-yield bonds, refer to those with credit ratings far below "investment grade." According to the rating systems of S&P and Fitch, bonds rated below BBB- are considered junk bonds; according to Moody's Corporation's rating system, bonds rated below Baa3 are considered junk bonds. These high-yield bonds are usually issued by companies with poor financial conditions or emerging, unprofitable businesses, carrying a higher risk of default, requiring higher bond yields to attract investors to compensate for the additional higher risk they bear. Warner Bros. Discovery, formed by the merger of WarnerMedia under AT&T and Discovery, Inc. in April 2022, faced high debt and transformation pressures from the beginning. However, despite the high debt burden, the newly formed Warner Bros. Discovery with a century-old film brand Warner Bros. Pictures still holds a prominent position among the "Hollywood film giants" alongside Walt Disney Company, Universal, Paramount, and Sony, known as the "Big Five" of Hollywood mainstream studios. Over the past two years, Warner Bros. Discovery has seen overall declining or volatile performance, especially in revenue and cash flow, with core reasons including loss of traditional linear TV advertising users and subscription users, huge merger debt, content impairment, continued growth in streaming transformation costs, and pressure from sports rights, among other factors.