Welcome back to Dry Powder. I’m Bill Cohan.

On Thursday morning, as I was reading through Robert Gibbs’s carefully crafted Warner Bros. Discovery press release announcing that David Zaslav was reorganizing the company and essentially following the same strategic path that his frenemy Brian Roberts had started down a month earlier at Comcast, two particularly intriguing sentences stood out to me. In today’s issue, a close look at what that document reveals about WBD’s plans.

But first…

• Jonah and the whale: A few days after it looked like BuzzFeed’s creditors might force the “going concern” into a debt restructuring—or worse, bankruptcy—the publicly traded digital media company seems to have pulled a rabbit out of its hat, staving off financial disaster, at least for now. On December 12, BuzzFeed announced it had consummated a deal with a group of investors, led by funds affiliated with George Soros, to sell its First We Feast brand—the food blog turned digital media phenomenon, featuring the celebrity-stacked Hot Ones talk show—for $82.5 million in cash. Those proceeds, along with the $54 million on BuzzFeed’s balance sheet, as of September 30, gives the company some $136.5 million in cash, enough to pay off the $124 million in 8.5 percent convertible notes due 2026 that posed an urgent existential dilemma for the company. (For more on BuzzFeed’s high-wire week, you can revisit my previous dissertation here.)

  According to a new filing with the Securities and Exchange Commission, BuzzFeed will use $75.6 million of the First We Feast proceeds to redeem a majority of the notes—a transaction that is slated to close on December 18. Separately, the company’s filing indicated that it had reached an agreement with other noteholders to buy $12 million of their notes for 100 cents on the dollar, plus accrued interest. That transaction closed December 11. After all is said and done, some $30 million of principal will still be outstanding and allowed to be outstanding, per a new agreement reached with the noteholders.

  From what I can glean from the public filings, BuzzFeed will now have nearly $50 million in cash on hand and the $30 million of debt, making for a very favorable net debt position, below zero. Its “adjusted EBITDA” for the nine months of 2024 ended September 30 was around $2 million, which would barely cover the $2.5 million of annual interest payments on that still-outstanding $30 million of debt. (This is where that $50 million of cash the company has will come in handy.)

  So while an existential crisis has been averted, challenges aplenty remain for C.E.O. Jonah Peretti. BuzzFeed’s “adjusted EBITDA” could use a boost, especially since it’s not known how much EBITDA, if any, First We Feast was contributing to the mix of BuzzFeed, HuffPost, etcetera. (It must have been substantial for the new investors to have paid $82.5 million.) In a separate press release, BuzzFeed issued guidance for its fourth quarter, ending December, of revenue between $54 million and $58 million and “adjusted EBITDA” between $4 million and $9 million.

  That sounds like good news, right? Well, for whatever reasons, the market didn’t like the deal. (Maybe analysts and investors know that Hot Ones was BuzzFeed’s golden goose?) Anyway, BuzzFeed’s stock was down nearly 13 percent on Thursday and another 5 percent on Friday, giving the company a market value of $130 million—about one -ninth of what it was worth after its first day as a public company back in December 2021.

And now, Zaz…

In a surprise, except to those of us who closely follow the company’s machinations, Zaz announced that he was reorganizing Warner Bros. Discovery into two operating units: one a fast-growing “Streaming & Studios” business—Max, HBO, and Warner Bros.—and the other comprised of WBD’s profitable but declining cable television assets, including TNT, CNN, and the Food Network, among others, and known by the far less enticing moniker, “Global Linear Networks.” The WBD press release described this latter group as “a premier linear television business,” but he might as well have labeled the two divisions as workhorses and show ponies.

But there were two particularly intriguing sentences in the carefully crafted press release, perhaps Robert Gibbs’s first magnum opus as WBD’s still-newish head of communications. The first declared that the new structure would “increase optionality” to “pursue further value creation opportunities for both divisions in an evolving media landscape.” In other words, this is just the first step in a strategic process that will lead to future M&A.

The second reveal was that Zaz has hired three investment banks—J.P. Morgan, Evercore, and Guggenheim Securities (no doubt including my friend Alan Schwartz, the former C.E.O. of Bear Stearns)—and two high-powered law firms, Kirkland & Ellis and Wachtell Lipton. You don’t need three M&A advisors and two legal advisors just to reorganize the divisions of your company. Instead, you pay their considerable fees so they can meticulously analyze what a spinoff, sale, or some other strategic separation of the Global Linear Networks would look like, including when and how to announce it, how much debt to pile on to it, and whether that business should try to bring in a private equity partner. And, of course, you don’t include a detail like this in a press release unless you want the market to know exactly what you’re doing.

In this regard, I think Zaz is taking a smarter, more lemons-into-lemonade approach with his cable assets than Brian Roberts and Mike Cavanagh seem to be. Comcast is insistent that its SpinCo will be “well capitalized,” meaning it will not have too much debt—which makes sense because Comcast does not have the same debt burden as WBD. Comcast is also insistent that its SpinCo will be publicly traded and free of outside private equity investment—meaning Comcast’s existing shareholders would get the upside in that company. Of course, the stock of SpinCo could also trade down, leading to regret for not taking a private equity investment at the outset, but that’s on them.

Zaz and Gunnar Wiedenfels, his C.F.O., could also load up his spinco with debt while simultaneously taking the private equity investment, which could be used to pay down more of WBD’s debt. Zaz’s debt reduction machinations could also include setting up CNN for a sale. CNN, after all, has been one big headache after another for Zaz since April 2022, as my partner Dylan Byers has expertly documented from the beginning. And this whole divisional restructuring maneuver could be a gentlemanly way of marketing the asset with a light touch. Would RedBird Capital principal Gerry Cardinale and his partner Jeff Zucker, the C.E.O. of RedBird IMI and the former president of CNN, be interested in buying CNN? Would they be willing to pay something like 10x CNN’s $750 million estimated EBITDA these days (down from $1 billion during the Zucker era), or $7.5 billion?

It seems like a long putt, but I wouldn’t rule that out—especially given the optionality it might provide Cardinale’s other partners, the Ellisons, regarding the future of CBS News. Either way, there will likely be other interested parties. What about Theo Kyriakou and his Antenna Media, with its vast European TV holdings, which had been kicking the tires hard on Marc Benioff’s Time? That would be another ~$7.5 billion reduction of WBD’s debt.

Earlier this week, he cut a new carriage deal with Comcast that worked out far better for WBD than most people thought it would, especially since Roberts could have zinged Zaz on carriage fees now that TNT lost its NBA rights. Instead, the two men worked out a deal that will probably serve both of them well. And now, with Thursday’s reorg, Zaz has made clear he’ll do what’s necessary to reduce the sting of his declining linear TV business and get WBD a much-desired credit-rating upgrade. And, boy, have equity investors responded. The WBD stock was up 15.4 percent on Thursday alone, and up 35 percent in the last month. The tide is beginning to turn.