Barclays says Warner Bros. upside depends on recapitalization

Barclays analyst Kannan Venkateshwar says Warner Bros. Discovery (WBD) formally announced a split of the company into two, which has been expected by investors since it announced a restructuring of the company into two divisions last year. The company has $37B of gross debt and another $5B of off balance sheet debt and neither standalone entity will have enough EBITDA to absorb this on a standalone basis without a significant increase in leverage, the analyst tells investors in a research note. Barclays believes realizing valuation upside will depend more on a future recapitalization path rather than the announcement this morning. It keeps an Equal Weight rating on Warner Bros. Discovery with a $9 price target

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