# Nvidia Boosts Share Buyback Program by $150 Billion

An episode of [Bloomberg Intelligence](https://invisiblenetwork.ai/podcast/326301337), 28 Sep 2026, 28 min.

Audio: https://podtrac.com/pts/redirect.mp3/tracking.swap.fm/track/UVBrz8bN8aM2Xe47PEPu/traffic.omny.fm/d/clips/e73c998e-6e60-432f-8610-ae210140c5b1/7f534b8c-9e91-429a-b102-ae3c00090c6d/bc24042e-9816-42d4-b788-b4d3011909f3/audio.mp3?utm_source=Podcast&in_playlist=0ad812bf-fd15-4012-a18c-ae3c00090c76

Watch Paul and Scarlet LIVE every day on YouTube: http://bit.ly/3vTiACF. Bloomberg Intelligence hosted by Paul Sweeney and Scarlet Fu -Matthew Bloxham, Bloomberg Intelligence Senior Media and Tech Analyst, discusses top tech stories of the day. Nvidia Corp. increased the size of its share buyback plan by $150 billion, taking the total remaining authorized amount to $235 billion. The company expects to complete the program through fiscal 2028, according to a statement on Monday. - Geetha Ranganathan, Bloomberg Intelligence Analyst on US Media, discusses the impact of Muse across media and telecom space. According to Bloomberg Intelligence: Meta's Muse could turn AI from assistant into gatekeeper, creating a new layer of disruption across media and telecom as discovery, comparison and transactions shift away from traditional interfaces. Wireless and broadband look most exposed as agents make shopping, negotiation and switching easier, raising churn and pressuring pricing. -Stephen Flynn, Bloomberg Intelligence Senior Credit Analyst, discusses research on Paramount-Skydance. According to Bloomberg Intelligence: Paramount Skydance expects to sell about $12.4 billion equivalent of junk-rated second lien notes to help fund its pending $110 billion acquisition of Warner Bros. Discovery, with the amount of dollar-denominated notes issued likely to rival SoftBank Group's $10 billion sale of BB+ rated bonds on Sept. 23. -- Michelle Korsmo, CEO of National Restaurant Association, discuses restaurant industry headwinds. The National Restaurant Association recently launched its “Made in Restaurants,” a new national initiative celebrating the restaurant industry and its role in shaping people, careers and communities. The initiative, built on a combination of first-hand stories and economic research, highlights the role of the industry in driving the economy. Bloomberg Radio has invited Michelle Korsmo to speak on the state of the industry and highlight the new campaign, which shows how restaurants are not only cornerstones of their communities but shape the workforce by providing employees with the skillsets needed to sustain long-term careers both within and outside of the industry. See omnystudio.com/listener for privacy information.

## Transcript

[0:02] Speaker 1: Bloomberg Audio Studios.
[0:04] Speaker 2: Podcasts.
[0:05] Speaker 3: Radio.
[0:06] Speaker 4: News.
[0:09] Speaker 5: You're listening to the Bloomberg Intelligence Podcast. Catch us live
[0:13] Speaker 5: weekdays at 10 a.m. Eastern on Apple CarPlay and Android
[0:16] Speaker 5: Auto with the Bloomberg Business App. Listen on demand wherever
[0:19] Speaker 5: you get your podcasts or watch us live on YouTube.
[0:24] Speaker 3: Paul, I'm looking at all the headlines, and of course
[0:25] Speaker 3: it's all the Iran war, all oil, all rising bond yields,
[0:29] Speaker 3: and then there's a lot of stories, of course, on
[0:31] Speaker 3: what's going on in big tech, Nvidia with this massive
[0:35] Speaker 3: $ 150 share buyback. I can't even imagine how much cash
[0:40] Speaker 3: flow it throws off that it can just buy $ 150
[0:42] Speaker 3: billion of its own shares.
[0:43] Speaker 2: I'd like to be the trader on Wall Street that
[0:46] Speaker 2: gets this buyback. I'm just out there buying stock with
[0:48] Speaker 2: no risk. How cool is that?
[0:50] Speaker 3: All right, let's bring in Jonathan Bloxham. He's with us
[0:52] Speaker 3: right now. Matthew Bloxham. Excuse me, Matthew.
[0:55] Speaker 1: No problem.
[0:55] Speaker 3: He's with us right now. He's our senior media and
[0:57] Speaker 3: tech analyst, normally in London.
[0:59] Speaker 2: Yes.
[0:59] Speaker 3: But here in New.
[1:00] Speaker 1: York with us for the week.
[1:01] Speaker 6: Especially for you, right?
[1:02] Speaker 3: Great to see you here in office, in studio. Really,
[1:05] Speaker 3: really appreciate your joining us today. NVIDIA buying its shares back.
[1:09] Speaker 3: Is that a sign that the shares are undervalued? Because
[1:12] Speaker 3: that's what typically people say when you embark on a
[1:15] Speaker 3: massive buyback. And this is a massive buyback.
[1:18] Speaker 6: Yeah, that's certainly one interpretation. The other is that maybe
[1:24] Speaker 6: they're running out of things to invest the money in.
[1:27] Speaker 6: And I think it's probably a mixture of the two.
[1:29] Speaker 6: I mean, given the trillions of dollars going into AI
[1:32] Speaker 6: right now, I don't think there's so much of a
[1:35] Speaker 6: constraint on what they can invest in. But they are
[1:38] Speaker 6: spreading their financial muscle quite broadly across the industry. They've
[1:43] Speaker 6: got lots of investments in in partners. They've obviously kind
[1:47] Speaker 6: of recently spent, what, kind of 18 to 20 billion,
[1:51] Speaker 6: if I remember correctly, on Hugging Face. So, you know,
[1:52] Speaker 6: they're kind of spreading the money around. I think, obviously,
[1:55] Speaker 6: you know, particularly in the U.S. market, buybacks are a
[1:58] Speaker 6: very popular way to return shares, the cash to shareholders.
[2:02] Speaker 6: And so, I think it's not that surprising given, you know,
[2:05] Speaker 6: that they're I think in this financial year, they'll generate
[2:07] Speaker 6: something like $ 200 billion of cash flow. Next year, it's
[2:11] Speaker 6: expected by consensus to go up to about $ 330 billion. So,
[2:15] Speaker 6: I think this is them saying to the market, look,
[2:18] Speaker 6: you know, there's lots of kind of noise around AI
[2:20] Speaker 6: right now. Our forward pipeline for at least the next
[2:23] Speaker 6: one to two years is looking incredibly healthy. No need
[2:27] Speaker 6: to worry about our runway of growth.
[2:30] Speaker 2: Matt, what's the conversation you're having with clients these days,
[2:33] Speaker 2: just broadly about AI?
[2:35] Speaker 1: We kind of had that level of uncertainty kind.
[2:37] Speaker 2: Of get interjected several weeks ago when some of the founders,
[2:41] Speaker 2: Sam Altman, Elon Musk, not founders, but some of the
[2:43] Speaker 2: original executives in this technology, maybe said, let's put the
[2:47] Speaker 2: brakes on this a little bit. And that was a
[2:49] Speaker 2: you know, pause, it's kind of become a little political
[2:51] Speaker 2: by President Trump weighing in as well.
[2:54] Speaker 1: What are investors thinking about that now? Yeah, you know,
[2:56] Speaker 1: I mean, when we.
[2:57] Speaker 6: Look back, actually, the reaction was initially quite positive. And,
[3:01] Speaker 6: you know, there's obviously lots of different ways you can
[3:02] Speaker 6: take this messaging. I think a lot of people took
[3:05] Speaker 6: it as a view that, you know, that these open
[3:08] Speaker 6: AI and Anthropic in particular, looking to strengthen the moat
[3:12] Speaker 6: they have against, for example, the likes of Meta, obviously
[3:14] Speaker 6: news today that they're, uh, taken a new CEO for
[3:18] Speaker 6: their enterprise business. And that, you know, actually, as much
[3:21] Speaker 6: as there may be some concerns about the pace at
[3:24] Speaker 6: which AI is developing and our control over it, that
[3:26] Speaker 6: actually this could be a good mechanism for them to
[3:29] Speaker 6: kind of protect the moat they have, because it would
[3:31] Speaker 6: constrain the whole industry in terms of the pace of development.
[3:34] Speaker 6: You know, I think broadly speaking, obviously, there are still
[3:37] Speaker 6: concerns about the kind of three to five year outlook
[3:39] Speaker 6: for AI, but certainly in the near term, and again,
[3:42] Speaker 6: reflected in what NVIDIA has done today, the market is
[3:46] Speaker 6: pretty confident that there's enough momentum to sustain the next
[3:50] Speaker 6: one to two years. And enterprises are still at an
[3:53] Speaker 6: early stage of deploying AI into their businesses. And even
[3:56] Speaker 6: if you didn't have any further evolution of the frontier
[4:00] Speaker 6: models from where they are today, there's still lots of
[4:04] Speaker 6: technology capability there for enterprises to play with and really
[4:06] Speaker 6: shift the way their business.
[4:07] Speaker 3: Is So we're approaching the end of the third quarter.
[4:12] Speaker 3: The fourth quarter will begin soon on October 1st, and
[4:15] Speaker 3: that means earnings season is kind of around the corner.
[4:18] Speaker 3: The big tech names report at the end of October.
[4:21] Speaker 3: What are we likely to hear from them when it
[4:23] Speaker 3: comes to CapEx? I mean, are they going to continue
[4:25] Speaker 3: to increase CapEx at the rate that they've been increasing
[4:28] Speaker 3: in thus far? Or will all the political discussion over
[4:32] Speaker 3: AI and whether we should slow development mean that some
[4:35] Speaker 3: of the hyperscalers will start to see the numbers reflect
[4:38] Speaker 3: that slowdown?
[4:41] Speaker 1: Great question.
[4:43] Speaker 6: My sense would be that the market is still anticipating
[4:48] Speaker 6: growth in spending next year. Obviously, nowhere near the pace
[4:53] Speaker 6: we've seen before. But I think we're still expecting to
[4:57] Speaker 6: see it increase. And as much as there's been a
[5:00] Speaker 6: lot of fanfare around slowing the pace of model development,
[5:05] Speaker 6: there's still a huge amount of implementation spend to come through.
[5:10] Speaker 6: Probably right now the biggest constraint on implementation. the pace
[5:14] Speaker 6: of capital spending growth is the supply side, all the
[5:18] Speaker 6: way from the kind of fab units to the chips,
[5:22] Speaker 6: to the capacity to make the chips, and then also
[5:25] Speaker 6: all the way through to energy and space and how
[5:28] Speaker 6: quickly can you actually deploy data centers, which is where
[5:31] Speaker 6: ultimately a lot of this capex ends up. So that's
[5:33] Speaker 6: probably the biggest natural constraint, I'd say, on spending.
[5:37] Speaker 2: Matt, it probably doesn't surprise you, but I am way
[5:39] Speaker 2: ahead of both John and Scarlett on AI.
[5:42] Speaker 1: I'm way out there. I've got the window on my
[5:45] Speaker 1: phone that's got the apps. I've got ChatGPT. I've got Gemini.
[5:49] Speaker 1: I've got Claude. He added Muse. I added Muse. But
[5:53] Speaker 1: I'm guessing.
[5:54] Speaker 2: I'm not the monetization that these gajillion-dollar CapEx are being
[5:58] Speaker 2: spent for. Talk to us about enterprise integration of AI.
[6:02] Speaker 1: Is that happening? Because it's not cheap. to deploy AI
[6:07] Speaker 1: and use AI in an enterprise?
[6:09] Speaker 6: It certainly isn't. I mean, it's definitely happening, you know,
[6:11] Speaker 6: across every sector. And if anything, you know, this year,
[6:16] Speaker 6: enterprises are kind of running into some spending, you know,
[6:20] Speaker 6: kind of constraints or kind of obstacles they probably hadn't
[6:24] Speaker 6: anticipated because, you know, they've kind of largely let their
[6:26] Speaker 6: engineers run loose with, you know, playing around with this stuff.
[6:29] Speaker 6: And then they suddenly realized that the consumption is ahead
[6:32] Speaker 6: of the budget they put in there. And they're now
[6:33] Speaker 6: having to scratch their heads and go, okay, Do we
[6:35] Speaker 6: increase our dollar budgets to continue with the pace of development?
[6:39] Speaker 6: Or do we have to start to kind of find
[6:40] Speaker 6: ways to kind of moderate or change the way our
[6:43] Speaker 6: engineers are? uh, are using AI tokens to kind of
[6:46] Speaker 6: develop things. And, you know, the answer is so far
[6:48] Speaker 6: being a bit of a mixture of the two. Uh,
[6:51] Speaker 6: but yeah, the enterprise market's huge and it's a massive, massive,
[6:54] Speaker 6: massive multi-trillion dollar market. Uh, when you look at technology
[6:57] Speaker 6: as a whole, um, and I think it's, it's, it's
[7:00] Speaker 6: becoming the new, you know, kind of theater of competition,
[7:03] Speaker 6: if you like, between the big players. And, you know,
[7:05] Speaker 6: this is where Meta's coming in with its enterprise strategy
[7:08] Speaker 6: and historically Meta, very much a consumer focused ad funded
[7:11] Speaker 6: business and looking to kind of, uh, compete with OpenAI
[7:15] Speaker 6: and Anthropic in that space. I think it's going to
[7:17] Speaker 6: be a really interesting space over the next 12 to
[7:20] Speaker 6: 24 months to see how that competition evolves, but it's
[7:23] Speaker 6: kind of really a huge opportunity for all of them.
[7:26] Speaker 3: Yeah, and Meta's doing that, as we mentioned, by tapping
[7:29] Speaker 3: MongoDB's president and CEO to lead this new AI platform
[7:33] Speaker 3: for enterprise customers. Has Meta ever done anything at an
[7:36] Speaker 3: enterprise level targeting enterprise customers?
[7:38] Speaker 1: I mean, is this the first? I think it....
[7:42] Speaker 6: If it isn't the first, then it's kind of close
[7:44] Speaker 6: to a first. Certainly, I think their kind of biggest
[7:47] Speaker 6: and most significant push into this. I mean, they've been,
[7:50] Speaker 6: you know, working and engaging with corporates indirectly, I'd say,
[7:54] Speaker 6: in the AI space so far because, you know, their
[7:57] Speaker 6: models are open source and so a lot of companies
[8:00] Speaker 6: do use them. But I guess that's kind of a
[8:02] Speaker 6: bit of an arm's length interaction because there's not so
[8:05] Speaker 6: much direct involvement. This is, you know, much more significant,
[8:08] Speaker 6: almost like kind of consulting evolution of, you know, I guess,
[8:12] Speaker 6: kind of forward deployed engineers. That's the kind of phrase
[8:15] Speaker 6: that we never used to talk about, you know, kind
[8:16] Speaker 6: of helping organizations to kind of figure out how they
[8:20] Speaker 6: can use AI in their specific enterprise use cases to
[8:24] Speaker 6: kind of improve efficiency or create new opportunities.
[8:28] Speaker 1: Matthew, you're based in London.
[8:29] Speaker 2: You spend a lot of time with companies all across Europe.
[8:33] Speaker 2: Is AI, is there going to be any AI created
[8:37] Speaker 2: in Europe? Because there's not a lot of technology companies
[8:40] Speaker 2: in Europe. Is it going to be left to China
[8:44] Speaker 2: and the U.S. to drive this bus? Because, boy, it'd
[8:47] Speaker 2: be amazing if European companies did not get involved.
[8:51] Speaker 6: Yeah, it's, yeah. I mean, I guess, you know, the
[8:54] Speaker 6: poster child still is Mistral AI, which is, you know,
[8:57] Speaker 6: the kind of closest we've got to, like, a frontier
[9:00] Speaker 6: model company. Very small, and, you know, I think, whereas
[9:03] Speaker 6: you used to hear a lot about them a year
[9:05] Speaker 6: or two back, you know, they've kind of gone into
[9:07] Speaker 6: the shadows a little bit, you know, given everything that's
[9:09] Speaker 6: going on with the U.S. and the Chinese frontier models.
[9:13] Speaker 6: So I think something like that is kind of one
[9:14] Speaker 6: of Europe's biggest opportunities. There are some initiatives underway across
[9:20] Speaker 6: a number of European markets to try to shift people
[9:23] Speaker 6: away from using U.S. tools to European tools. But when
[9:27] Speaker 6: those tools either don't exist or they're kind of significantly inferior,
[9:30] Speaker 6: that's a kind of really hard thing to kind of
[9:32] Speaker 6: ask people to do. So my sense would be that,
[9:35] Speaker 6: you know, like with a lot of technology in the past,
[9:38] Speaker 6: Europe's going to be a taker of another region's technology.
[9:41] Speaker 6: And so the opportunity, if there is one, is for
[9:45] Speaker 6: European businesses to excel at leveraging the use of that technology,
[9:50] Speaker 6: almost kind of the kind of second derivative of the
[9:53] Speaker 6: services that sit on top of that. And also, you know,
[9:57] Speaker 6: one of the big issues for Europe is how they
[9:59] Speaker 6: support deploy this technology infrastructure into the region. You know,
[10:03] Speaker 6: we've got this kind of back and forth debate about,
[10:06] Speaker 6: you know, where does the data reside? If it has
[10:09] Speaker 6: to be in Europe, then that's a massive investment in infrastructure.
[10:13] Speaker 1: Stay with us. More from Bloomberg Intelligence coming up after this.
[10:20] Speaker 5: You're listening to the Bloomberg Intelligence Podcast. Catch us live
[10:24] Speaker 5: weekdays at 10 a.m. Eastern on Apple CarPlay and Android
[10:27] Speaker 5: Auto with the Bloomberg Business App. Listen on demand wherever
[10:30] Speaker 5: you get your podcasts or watch us live on YouTube.
[10:35] Speaker 7: All right.
[10:35] Speaker 1: Meta, Muse, big news last week. Meta stock jumped big time.
[10:40] Speaker 2: Some people are questioning, all right, what's the risk here
[10:43] Speaker 2: from AI, Muse and all this kind of stuff, particularly
[10:47] Speaker 2: in creating content? And that's one of the areas that
[10:51] Speaker 2: the BITMT team, Tech Media Telecom team, took a look
[10:54] Speaker 2: at here. Geetha Ranganathan leads it up there. So, Geetha,
[10:58] Speaker 2: talk to us about, you know, Muse. You guys are
[11:02] Speaker 2: suggesting maybe a target telecom and some of the moats
[11:06] Speaker 2: from telecom companies and media.
[11:08] Speaker 1: Talk to us about that.
[11:10] Speaker 3: Yeah, absolutely.
[11:10] Speaker 8: Thank you so much, Paul. So, you know, any place
[11:13] Speaker 8: where you see a lot of consumer inertia, I mean,
[11:16] Speaker 8: that is the perfect place for Muse. So, I mean,
[11:18] Speaker 8: this is not just comparing prices, right? You think about
[11:21] Speaker 8: your internet plan, like your broadband subscription plan that you're
[11:24] Speaker 8: paying for, or even, you know, telecom wireless plans. I mean,
[11:28] Speaker 8: this is all just perfect comparison. a perfect place for
[11:31] Speaker 8: Muse to kind of come in. Because remember, they're not,
[11:33] Speaker 8: Muse is not just comparing prices. It is actually helping
[11:37] Speaker 8: you to take the next step, compare all of these
[11:40] Speaker 8: different plans, and then go shopping. So, you know, traditionally,
[11:44] Speaker 8: we've seen telecom companies or cable companies, a lot of
[11:47] Speaker 8: consumer inertia there, because people just basically subscribe, they pay
[11:50] Speaker 8: their bill, they don't really go back and check and
[11:52] Speaker 8: shop around just because of Customer service, right? It's such
[11:56] Speaker 8: a painful process. You know that your cable company is
[11:58] Speaker 8: the most hated company in America. So nobody wants to
[12:02] Speaker 8: be sitting on the line talking to a customer service
[12:04] Speaker 8: rep for like five hours and trying to figure out
[12:06] Speaker 8: what to do. Muse now kind of takes over that
[12:09] Speaker 8: whole process, makes it so simple. And this is really scary,
[12:13] Speaker 8: I would say, for both the cable companies. You think
[12:16] Speaker 8: about a Comcast or a Charter and even some of
[12:18] Speaker 8: the telecom companies, especially when all of them are fighting
[12:21] Speaker 8: off each other in this really, really competitive landscape. And
[12:26] Speaker 8: you have the looming threat of a new competitor in Starlink.
[12:30] Speaker 1: Yeah, it's amazing.
[12:31] Speaker 2: See, I'm going to send this report to Matt Miller
[12:32] Speaker 2: because he and I have a running feud. I arbitrage
[12:35] Speaker 2: Uber and Lyft, and I save 10%, 20% often.
[12:39] Speaker 1: But it takes effort on your part. It takes another, yeah.
[12:41] Speaker 1: But now Muse can do it for me.
[12:43] Speaker 3: Okay, so you have the Muse app on your phone.
[12:46] Speaker 3: Are you going to deploy it?
[12:47] Speaker 1: I'm going to start doing it. All right, Matt Miller
[12:49] Speaker 1: does not do this. No, he just goes to one
[12:52] Speaker 1: or the other. Uber, I think. It's a big running
[12:56] Speaker 1: feud we have.
[12:57] Speaker 3: That makes a lot of sense, Geetha, what you say
[12:59] Speaker 3: about how muse can do a lot of the heavy
[13:01] Speaker 3: lifting on the kind of work that people don't feel
[13:03] Speaker 3: like doing. But after a period of time, even with this...
[13:09] Speaker 3: AI agent doing the work for you, people still have
[13:11] Speaker 3: to think of it and move forward with it. And
[13:14] Speaker 3: that inertia is pretty powerful. I mean, do you have
[13:18] Speaker 3: any numbers in terms of what percentage of the population
[13:21] Speaker 3: are going to start working on this or moving forward
[13:24] Speaker 3: with something like this to compare prices and actually try
[13:27] Speaker 3: to pin down these lower prices?
[13:31] Speaker 7: Absolutely.
[13:32] Speaker 8: I mean, we've run some surveys, some proprietary BI surveys,
[13:35] Speaker 8: not specifically for Muse itself, Scarlett, but just in general,
[13:38] Speaker 8: kind of looking at the pricing landscape across a lot
[13:41] Speaker 8: of these subscription services. And believe it or not, for broadband,
[13:45] Speaker 8: you know, it used to be that speed was everything
[13:48] Speaker 8: and now price is everything. And in some of the
[13:51] Speaker 8: surveys that we ran, we've seen that at least 35%
[13:53] Speaker 8: to 40% of the population are willing to switch and
[13:57] Speaker 8: make that effort if they have a more competitive price.
[14:02] Speaker 8: And now you introduce Mews into the equation, I think
[14:05] Speaker 8: it's going to be much, much higher than 40%. If
[14:07] Speaker 8: you have somebody who's already doing all of the heavy
[14:09] Speaker 8: lifting for you, all of the dirty work, it just
[14:12] Speaker 8: makes that whole process, the friction go away and makes
[14:15] Speaker 8: the process so much more painless and easier.
[14:18] Speaker 2: So is Muse going to argue on the phone for
[14:21] Speaker 2: three hours with a Comcast or a T-Mobile rep?
[14:25] Speaker 1: It's getting there, Paul.
[14:26] Speaker 8: It's first starting off like on the internet, talking with
[14:29] Speaker 8: the chatbots.
[14:31] Speaker 1: So it did that actually.
[14:32] Speaker 8: Yeah, I mean, we've had a couple of examples posted
[14:34] Speaker 8: all over the internet of news kind of talking to
[14:36] Speaker 8: some of the chatbots, the customer service chatbots, and arguing
[14:39] Speaker 8: for a better price. And it managed to even switch
[14:42] Speaker 8: for a few customers. So, you know, I mean, if
[14:44] Speaker 8: I were a telecom company or a cable company, I
[14:46] Speaker 8: would definitely, you know, be pretty concerned at this point.
[14:50] Speaker 1: Stay with us.
[14:51] Speaker 3: More from Bloomberg Intelligence coming up after this.
[14:57] Speaker 5: You're listening to the Bloomberg Intelligence Podcast. Catch us live
[15:01] Speaker 5: weekdays at 10 a.m. Eastern on Apple CarPlay and Android
[15:04] Speaker 5: Auto with the Bloomberg Business App. Listen on demand wherever
[15:07] Speaker 5: you get your podcasts or watch us live on YouTube.
[15:12] Speaker 1: Another big mega bond deal hitting the market.
[15:15] Speaker 2: Paramount puts $ 44 billion bond sale in the market for
[15:19] Speaker 2: to close their Warner Brothers Discovery deal. So that's kicking off.
[15:22] Speaker 2: So we want to get the latest on what's happening
[15:24] Speaker 2: in that part of the market. Steve Flynn joins us here.
[15:26] Speaker 2: He covers all the tech media, telecom credit out there.
[15:31] Speaker 2: So $ 44 billion, this is, talk to us about this deal.
[15:34] Speaker 1: What's going on here?
[15:35] Speaker 3: Hey, Paul.
[15:35] Speaker 7: Well, this deal is to help fund Paramount's acquisition of
[15:38] Speaker 7: Warner Brothers, which should close relatively soon. There's significant debt
[15:43] Speaker 7: financing behind that. But the good thing, there's also significant
[15:45] Speaker 7: equity checks coming in from the Ellison family, coming in
[15:48] Speaker 7: from Redbird Capital, coming in from some sovereign wealth funds.
[15:51] Speaker 7: So you have a lot of equity capital behind it.
[15:53] Speaker 7: But It is a big bond deal. They want to
[15:56] Speaker 7: raise $ 44. 4 billion. It's a complicated deal because they're hitting
[16:00] Speaker 7: two big bond markets, right? They have first lien debt,
[16:04] Speaker 7: which is considered an investment grade. They're going to do
[16:06] Speaker 7: about $ 32 billion of that, which is going to be,
[16:09] Speaker 7: I believe, all dollar denominated debt. But then they're also
[16:12] Speaker 7: tapping the high yield markets. They have second lien obligations,
[16:15] Speaker 7: which are high yield. There they want to do about
[16:18] Speaker 7: $ 12. 4 billion equivalent, hitting both the dollar market and the
[16:21] Speaker 7: euro market in high yield.
[16:23] Speaker 4: Nice.
[16:24] Speaker 2: Bankers are making money, but interest rates are blowing out.
[16:27] Speaker 2: I mean, they're paying more in interest that I'm sure
[16:29] Speaker 2: they probably thought they would.
[16:31] Speaker 5: Yes.
[16:31] Speaker 7: So we've had underlying treasury rates moving up, up, up,
[16:34] Speaker 7: which is pushing, you know, the spreads were pretty good
[16:38] Speaker 7: holding in there, both investment grade and high yield. They've
[16:39] Speaker 7: started to bump out over the past couple of weeks.
[16:41] Speaker 7: So all in, you know, your investment grade market is
[16:45] Speaker 7: probably about 6% right now. I think it was like 5.9%
[16:48] Speaker 7: close on Friday. It's definitely probably around 6% now. High
[16:51] Speaker 7: yield market overall is over 8%. So, yes, they're going
[16:56] Speaker 7: to be paying a lot of interest pro forma for
[16:58] Speaker 7: this deal.
[16:59] Speaker 1: All right.
[16:59] Speaker 2: I'm going to quote you the market back in the
[17:01] Speaker 2: early 90s when I was lending to these companies from
[17:03] Speaker 2: the Chase Manhattan Bank. I'll lend three, maybe four times EBITDA.
[17:08] Speaker 2: You want to put any sub debt on top of that?
[17:09] Speaker 2: That's your problem. What's the total leverage.
[17:12] Speaker 1: Going to look like on this company pro forma?
[17:14] Speaker 2: And I'm going to ask you or tell you pre synergies.
[17:16] Speaker 1: Don't give me any of that synergy stuff.
[17:18] Speaker 2: What's the leverage on the pro forma Paramount Warner Brothers Discovery?
[17:22] Speaker 1: So leverage is high.
[17:24] Speaker 7: Leverage all in will probably be about mid six times
[17:28] Speaker 7: pro forma this year when you combine the two companies. EBITDA,
[17:31] Speaker 7: which is about $ 12 billion combined together for this year.
[17:36] Speaker 1: Net debt is expected to be.
[17:37] Speaker 7: Around $ 79 billion. So you're like six, four times. But
[17:42] Speaker 7: the company sees significant cost synergy. So again, combined, they're
[17:47] Speaker 7: about $ 12 billion of EBITDA. They see $ 6 billion of
[17:49] Speaker 7: cost savings combined. within three years. So that gives you
[17:53] Speaker 7: pro forma, I know you don't want to hear it,
[17:55] Speaker 7: but pro forma EBITDA of about $ 18 billion and leverage,
[17:58] Speaker 7: which is much lower. The second thing to know here
[18:02] Speaker 7: is that They're issuing first and second lien bonds. There
[18:06] Speaker 7: is debt securities that are subordinate to that. So there's
[18:09] Speaker 7: some leftover unsecured debt from Paramount, some stub pieces from
[18:14] Speaker 7: Warner Brothers, and some Paramount subordinated debt. So when you
[18:17] Speaker 7: look at those leverage numbers, that's all in the debt
[18:20] Speaker 7: that they're selling is higher priority.
[18:22] Speaker 1: And these are.
[18:23] Speaker 2: Businesses, the core businesses... they're not really growing that well.
[18:28] Speaker 2: I mean, so it's not like they can really earn
[18:30] Speaker 2: their way out of this leverage. So how are you guys,
[18:33] Speaker 2: how's the market, how are the rating agencies viewing this
[18:35] Speaker 2: capital structure?
[18:36] Speaker 1: Yeah, you know, it's interesting.
[18:37] Speaker 7: If you look at combined EBITDA for Warner Brothers and
[18:40] Speaker 7: Paramount over the past couple of years and consensus forecast
[18:43] Speaker 7: like this year, next year.
[18:45] Speaker 1: It's about $ 12 million.
[18:46] Speaker 7: It's basically been about flat because The revenue has been challenging.
[18:50] Speaker 7: These companies have done a good job of taking out costs,
[18:52] Speaker 7: but it's been very challenging to grow revenue because the
[18:55] Speaker 7: top line has been under pressure, right? Like traditional linear
[18:58] Speaker 7: television under significant pressure. Now they're growing in streaming. Studios
[19:03] Speaker 7: has been doing well. But overall, that is a challenge
[19:07] Speaker 7: for this company. So the real EBITDA growth is going
[19:10] Speaker 7: to come from cost takeout. Again, the $ 6 billion synergy number.
[19:14] Speaker 7: There's a fair amount of upfront costs to achieve those
[19:16] Speaker 7: synergies within the first year or so. But then after that,
[19:19] Speaker 7: you should see significant free cash flow. So as a bondholder,
[19:23] Speaker 7: you're really supported by two things. Number one, you love
[19:25] Speaker 7: the huge equity checks coming in behind you, supporting the deal.
[19:28] Speaker 7: You love the commitment from the Ellison family. And you
[19:31] Speaker 7: really do like the significant free cash flow that should
[19:35] Speaker 7: be generated a year to two out and going forward.
[19:38] Speaker 1: That will help repay your debt.
[19:40] Speaker 2: How about the consent decree that the Paramount's guidance signed
[19:42] Speaker 2: with the state's attorney general, does that put pressure on
[19:46] Speaker 2: their ability to generate those synergies? Like, they can't close
[19:49] Speaker 2: down one of the lots, which I thought would have been. Yeah.
[19:52] Speaker 7: And I think also the I believe I read that
[19:54] Speaker 7: the negotiating with the distributors to carry their television stations
[20:00] Speaker 7: or their cable stations.
[20:01] Speaker 1: I believe they still have to negotiate that separately.
[20:03] Speaker 7: The Paramount channels and the Warner Brothers channels that are
[20:06] Speaker 7: eliminate some leverage there.
[20:07] Speaker 1: So, yeah.
[20:10] Speaker 7: I don't think the consent degree is significantly troubling, and
[20:13] Speaker 7: I still think that they have a good chance of
[20:15] Speaker 7: getting their synergy target.
[20:16] Speaker 2: And do we have, real quick, do we have any
[20:19] Speaker 2: pro forma ratings from the agencies yet? Yes.
[20:21] Speaker 1: So all the three rating agencies came out.
[20:23] Speaker 7: The big key point here is that the Secure will
[20:26] Speaker 7: have two investment grade ratings, which puts it in the
[20:29] Speaker 7: Bloomberg Investment Grade Index.
[20:30] Speaker 2: Okay.
[20:31] Speaker 1: And the second liens will have high yield ratings.
[20:33] Speaker 2: So that's important because you need to have that in
[20:36] Speaker 2: the investment grade index because that.
[20:37] Speaker 1: Presumably create more or result in more buyers. It was key.
[20:41] Speaker 1: They had to. And the capital structure kind of mimics charter,
[20:45] Speaker 1: which I.
[20:45] Speaker 7: Know a company you know very well, where you have
[20:47] Speaker 7: the investment grade rated high grade, the unsecured rated high yield.
[20:53] Speaker 1: And I think ultimately they'd love to mimic... T-Mobile USA.
[20:58] Speaker 7: So T-Mobile bought Sprint, had a split-rated capital structure, hit
[21:03] Speaker 7: their synergies, de-levered, and moved the whole capital structure to
[21:05] Speaker 7: an investment grade.
[21:07] Speaker 1: Stay with us.
[21:08] Speaker 5: More from Bloomberg Intelligence coming up after this. You're listening
[21:14] Speaker 5: to the Bloomberg Intelligence Podcast. Catch us live weekdays at
[21:18] Speaker 5: 10 a.m. Eastern on Apple CarPlay and Android Auto with
[21:21] Speaker 5: the Bloomberg Business App. Listen on demand wherever you get
[21:24] Speaker 5: your podcasts or watch us live on YouTube.
[21:28] Speaker 1: All right.
[21:29] Speaker 3: Let's talk about what's going on in something that we
[21:32] Speaker 3: all are very familiar with, which is the restaurant industry.
[21:34] Speaker 3: Everyone's spending money going out to eat. It costs a
[21:37] Speaker 3: lot more to do so these days, and it costs
[21:39] Speaker 3: a lot more for those restaurants to operate as well.
[21:42] Speaker 3: We talk about rising costs, rising wages, rising diesel prices.
[21:46] Speaker 3: That has huge implications for the industry. Let's bring in
[21:49] Speaker 3: Michelle Korsmo. She is President and CEO of the National
[21:52] Speaker 3: Restaurant Association, and she joins us from Washington. Michelle, obviously
[21:56] Speaker 3: the industry is grappling with a lot of headwinds. I
[21:59] Speaker 3: mentioned higher costs, higher wages, higher food ingredient costs, higher
[22:04] Speaker 3: diesel prices, the logistics and everything else. Tell us a
[22:09] Speaker 3: little bit about, first of all, just how much more
[22:11] Speaker 3: difficult that has made the business environment for restaurants as
[22:15] Speaker 3: a whole.
[22:17] Speaker 4: Yeah, thanks for bringing this topic up because it's always
[22:20] Speaker 4: been a difficult industry in the restaurant business, and it's
[22:23] Speaker 4: getting more and more so because of all of those
[22:26] Speaker 4: pressure points. And I think the phrase I always think
[22:28] Speaker 4: about is continuous volatility. And that continuous volatility is tough
[22:33] Speaker 4: to manage in an industry that traditionally has 3% to 5%
[22:37] Speaker 4: profit margins and now is hovering in the 2% to 4%
[22:40] Speaker 4: profit margin. So every time you're in that environment, whether
[22:44] Speaker 4: it's increased protein costs or increased food costs, you've really
[22:48] Speaker 4: got to stay on top of how you manage all
[22:51] Speaker 4: of that to deliver at scale and stay profitable.
[22:54] Speaker 2: I didn't know this, but restaurants are the second largest
[22:57] Speaker 2: private sector employer in the country with 15.7 million workers. Elizabeth,
[23:03] Speaker 2: how has the labor market changed just in the last
[23:05] Speaker 2: couple of years with changes in immigration policy in this country?
[23:09] Speaker 4: Well, immigration policy has definitely been something that's been squeezing
[23:13] Speaker 4: the industry. And what we find is it hurts our
[23:17] Speaker 4: customer base as much as it hurts our workforce. So
[23:21] Speaker 4: we definitely need to add more workers in the restaurant industry.
[23:25] Speaker 4: We added 59,000 jobs just last month in August, which
[23:29] Speaker 4: is great news. But it means that that competition to
[23:32] Speaker 4: find those workers is is really tough. And so we're
[23:35] Speaker 4: looking to add more workforce all the time. There's definitely
[23:40] Speaker 4: been situations where even the fear of ICE immigration keeps
[23:45] Speaker 4: people away. What we find is most of the employees
[23:50] Speaker 4: do have legal documentation to work, so they're showing up,
[23:54] Speaker 4: but it's often impacting the guests coming into the restaurants.
[23:59] Speaker 3: Wait, can you explain that a little more? How does
[24:01] Speaker 3: it impact the guests coming into the restaurants?
[24:04] Speaker 4: Well, there's a fear of going out. There's a fear
[24:06] Speaker 4: of going out and being targeted. There's a fear of
[24:10] Speaker 4: what's happening.
[24:12] Speaker 1: Yeah.
[24:12] Speaker 4: So people tend to, especially if you feel like you
[24:16] Speaker 4: may be targeted, people tend to eat at home. So
[24:19] Speaker 4: there's just less traffic in our particularly heavily Hispanic demographic neighborhoods.
[24:25] Speaker 1: So what's some of the.
[24:28] Speaker 2: issues that the restaurant industry is doing to try to
[24:31] Speaker 2: drive traffic to their restaurants. How's the restaurant business today
[24:35] Speaker 2: different than maybe five or 10 years ago in terms
[24:37] Speaker 2: of driving revenue?
[24:39] Speaker 1: Lots of competition.
[24:40] Speaker 4: Some of the fundamentals remain the same, right? You have
[24:43] Speaker 4: to have the best flavor profile you can at the
[24:46] Speaker 4: right price point for the customer base that you're seeking
[24:50] Speaker 4: to target and serve. And so that value equation is
[24:54] Speaker 4: always held true. What's happening now is there's so much
[24:58] Speaker 4: more desire for certainty. So as people are making decisions
[25:02] Speaker 4: about what they're doing for dinner or what they're doing
[25:04] Speaker 4: for lunch, that price certainty is really makes a difference.
[25:07] Speaker 4: And you see this showing up in the way restaurants
[25:10] Speaker 4: are advertising. You'll see a lot of ads about the
[25:14] Speaker 4: main meal or a burger and fries and a drink
[25:17] Speaker 4: for a set price point. QuickService has known this for
[25:20] Speaker 4: years in their value menus where you set the value
[25:23] Speaker 4: menu price and people understand what they're going to pay.
[25:26] Speaker 4: And this is something that the full services environment has
[25:29] Speaker 4: really discovered is that that certainty on price makes a
[25:33] Speaker 4: difference to get those guest counts coming in.
[25:36] Speaker 3: Paul had mentioned how restaurants are the second largest private
[25:39] Speaker 3: sector employer in the country with 15.7 million workers. A
[25:43] Speaker 3: lot of folks get their first jobs in the restaurant industry,
[25:47] Speaker 3: but they don't always stay. What do you say to
[25:49] Speaker 3: those who want to stay in the industry but worry
[25:52] Speaker 3: about the growth prospects, about their career trajectory in the
[25:55] Speaker 3: restaurant industry?
[25:56] Speaker 4: We love talking about this because it impacts, as you said,
[26:00] Speaker 4: so many Americans. One out of two Americans had their
[26:04] Speaker 4: first job working in restaurants. And one of the things
[26:07] Speaker 4: we love about that is that people understand the skills
[26:10] Speaker 4: that you build while you're working in restaurants, right? The communication,
[26:14] Speaker 4: thinking on your feet, handling difficult situations, working with a team.
[26:19] Speaker 4: All of that happens when you're working in a restaurant.
[26:21] Speaker 4: And then they leave because they want to get what
[26:24] Speaker 4: they think might be a more professional job or a
[26:28] Speaker 4: real career. And what they miss, and we're telling this story,
[26:32] Speaker 4: is you can build a wonderful lifelong career working in restaurants.
[26:36] Speaker 4: And it's so much more than what you see for
[26:39] Speaker 4: the people serving or the people cooking your food. There's accountants,
[26:42] Speaker 4: there's IT people, there's marketing teams, there's operation teams, there's
[26:47] Speaker 4: finance teams, there's real estate development teams. There's so many
[26:51] Speaker 4: things that can be done in the restaurant industry as
[26:55] Speaker 4: a career that are really rewarding because at the end
[26:57] Speaker 4: of the day, every one of those people at their
[27:01] Speaker 4: core is about making the customer happy and serving customers.
[27:04] Speaker 4: And it's just a terrific place to give back to people.
[27:08] Speaker 4: The other thing that we love about people working in
[27:11] Speaker 4: restaurants is the real opportunity, regardless of where you came
[27:15] Speaker 4: from or where you started. This is an industry that
[27:19] Speaker 4: is about giving everybody the chance to succeed. And there's
[27:22] Speaker 4: a lot of training that happens while you're here. So
[27:25] Speaker 4: regardless of where you started, you can wind up with
[27:28] Speaker 4: a wildly successful career if you build it in the
[27:31] Speaker 4: restaurant industry.
[27:33] Speaker 5: This is the Bloomberg Intelligence Podcast, available on Apple, Spotify,
[27:38] Speaker 5: and anywhere else you get your podcasts. Listen live each weekday,
[27:41] Speaker 5: 10 a.m. to noon Eastern on Bloomberg.com, the iHeartRadio app, TuneIn,
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