Who Brings the Ball, Calls the Shots

Growing up, playing football was a rite of passage—and while we all tried to play fair and pick teams evenly, we always knew one rule:

Whoever brought the ball, got their way.

In Warner Bros.’ recent restructuring to re-divide its company in two, JPMorgan took their ball and went home.

The rise of new capital markets terms isn’t new—J. Crew revolutionized the Drop Down; Serta, the Uptier. Now Warner Bros. appears to have just created a new term of their own—the “anti-boycott” term.

Facing a share decline of 60% since its 2022 merger, Warner Bros. Discovery faced a stark reality—they needed to re-split the company while somehow convincing investment grade noteholders to accept a ‘haircut’ on their debt—previously unheard of in liability management transactions.

And they had to act fast:

➡️ JPMorgan’s landmark $17.5 billion bridge loan—the industry’s largest ever—gave WarnerBros the capital needed to pay off existing bondholders

➡️ Employing a “consent solicitation” (instead of the usual debt exchange or tender offer) allowed Warner Bros. to pay creditors to change the terms of their bonds—permitting a mere five day deadline to accept

➡️ Inclusion of a new structural element—the “anti-boycott” term—would subsequently make it harder for creditors to organize opposition to future debt incurred by Warner Bros.

It worked.

For creditors, this was a fresh reminder of the novel and aggressive tactics becoming far more commonplace in the capital markets.

For Warner Bros., while successful in their restructuring, this may be a Pyrrhic victory, since they must now re-tap the bond market not long after leaving current bondholders unhappy (it now carries a junk rating on its debt).

Whether Warner Bros. will become synonymous with “anti-boycott” terms remains to be seen, but with sophistication of transactions increasing, operating in the capital markets without Noetica’s platform analytics is like playing football without your safeties—good luck guarding against the Hail Mary.