Warner Bros Discovery’s cash tender and consent solicitation for all of its $35.5bn of outstanding bonds contains a requested change to bond indentures that would insert a novel provision that only permits cooperation agreements between creditors of the company to the extent said co-ops would not restrict any co-op member’s participation in any new issue.

The tender was launched Monday 9 June by JP Morgan, which funded the deal with a $17.5bn committed bridge facility. The tender offers above market prices for all the bonds that consent and tender, but Akin Gump is representing a group of bondholders that might push for an even higher premium, and possibly push back on any anti-coop provisions, according to 9fin sources.

The tender offer was launched in connection with Warner’s plan to separate its streaming and studio assets from the linear TV business, with one side called WBD Streaming & Studios containing the movies and HBO Max streaming platform, and the other side called WBD Global Networks housing the linear TV business including CNN, TNT, TBS and the company’s sports rights contracts, and Discovery+.

The co-op language

According to the text of the consent form and sources familiar, there is language that permits creditors to form cooperation agreement just so long as any such co-op agreement does not prevent them from buying into or participating in new issuances by the company.

Drafted by Kirkland & Ellis, this is only designed to avoid a situation like Bausch Health, which required co-op members amend the co-op in order to participate in the major refinancing that took place earlier this year. It would not prevent a co-op from forming that involved lenders agreeing with the company to privately negotiated LMEs and/or discounted exchanges.

Specifically, the consent form includes a “Non-Boycott Covenant”, which would amend “the DCL Indenture, the WMH 2022 Indenture and the WMH 2023 Indenture to add certain provisions prohibiting Holders or Notes Beneficial Owners…from entering into or becoming subject to or bound by any Boycott Agreement,” according to the text of the consent form viewed by 9fin, which continues: “Any holder or Notes Beneficial Owner that enters into, becomes subject to or otherwise becomes bound by a Boycott Agreement… shall be in breach of the DCL Indenture, the WMH 2022 Indenture or the WMH 2023 Indenture, as applicable, and shall be liable to the applicable Issuer for any damages in law or at equity that WBD and its subsidiaries may suffer as a result of such breach.”

A “Boycott Agreement” means any “boycott agreement, cooperation agreement, support agreement, lock-up agreement, coordination agreement or other similar agreement that restricts, limits, conditions or otherwise prohibits in any manner any Subject Person party thereto or otherwise bound thereby from (i) purchasing for cash any debt or securities issued by WBD and its subsidiaries or (ii) making any loans in cash to WBD and its subsidiaries, in each case, from time to time after the date of the entry into the applicable supplemental indenture to the DCL Indenture, the WMH 2022 Indenture or the WMH 2023 Indenture.”

The covenant is enforceable, according to the consent language, through “specific performance without the posting of any bond or otherwise.”

The company did not respond to a request for comment by press time. JPMorgan and Evercore are financial advisors to Warner and Kirkland has been serving as legal counsel, per the announcement.

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