S&P rates Magallanes notes BBB-

S&P said it assigned its BBB- issue-level rating to the planned unsecured notes issued by Magallanes Inc., which will be a core financing subsidiary of Warner Bros. Discovery Inc. upon completion of their merger.

“We expect the merger to close in the coming months and have rated the debt in line with the prospective rating on Warner Bros. Discovery Inc. Still, we view Magallanes as nonstrategic to AT&T because it will be spun out and subsequently merged into a wholly owned subsidiary of Discovery,” the agency said in a press release. The issuer credit rating on Discovery is BBB- outlook is positive.

“The new debt will rank equal to all other unsecured debt under that entity, with cross-guarantees across the structure that will take effect within 30 days of merger close. Before close, Magallanes will be a subsidiary of AT&T Inc., which will provide a conditional guarantee to the new unsecured debt that will fall away at close,” the agency added.

The proceeds will largely be used to fund a special cash payment to AT&T.

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