Time Warner Deal Adds to AT&T’s Heavy Debt Load

Buying Time Warner will make AT&T among the most heavily indebted companies on earth. In a deal announced Oct 22, AT&T agreed to pay $85.4 billion to buy the owner of CNN, HBO and TNT networks. Including debt, the value grows to $108.7 billion. And to finance the half-cash, half-stock deal, AT&T is taking on $40 billion of bridge loans.

AT&T, the largest nonfinancial corporate issuer of dollar-denominated debt, already has about $119 billion in net debt—roughly double what it was five years ago. “This would put them, I think, within striking distance of the financials with respect to unsecured bond issuance,” says Mark Stodden, a credit analyst at Moody’s. Stodden estimates the carrier’s total debt load will grow to as much as $170 billion if the deal is approved. AT&T hasn’t said precisely how much debt it plans to issue to fund the transaction, but estimates that by the end of the first year after the deal’s close, net debt will be around 2.5 times its adjusted earnings, up from 2.24 times at the end of the third quarter. Most recently, AT&T added to its debt when it bought the satellite-television operator DirecTV in 2015. It also paid $18 billion for wireless airwaves licenses during a 2015 government auction and spent roughly $10 billion buying its own shares in 2014. More spending is on the horizon tooas the carrier is currently participating in a government auction of wireless airwaves.