Discovery Communications seems to be preparing the Street for bad news about The HUB — the kids channel it co-owns with Hasbro. In a $500 million debt filing at the SEC this morning, Discovery says that last month the companies amended their partnership agreement to create an undescribed “trigger event” that could lead to a writedown indicating the property is worth less than they had thought. The filing adds that “The HUB’s management is in the process of conducting a fair value analysis to support goodwill impairment testing,” with the results expected in 3Q. The companies also agreed to an unspecified change in the license fees that The HUB pays for its cartoons. The channel, which targets ages 6-12, has struggled to grow since October when Discovery and Hasbro re-branded Discovery Kids. It has attracted an average total day audience of 23,000 so far in the second quarter, down from 24,000 in the first quarter.

A Discovery spokesperson says that the “goodwill review is simply a pro-forma accounting exercise and (the company) feels very positve and encouraged by The Hub’s early days’ performance and ability to grow its audience in the future.”

Discovery says it will support general corporate expenditures with the $500 million it hopes to raise from a sale of  senior unsecured notes due in 2021. Moody’s Investors Service says the company probably will use most of the cash to buy back its stock. Discovery has already repurchased 11.6 million shares of its common stock from the $1 billion currently authorized for that purpose. That includes the $147 million it spent between April 1 and June 10 to buy 3.9 million shares. Moody’s gave the new debt filing a Baa2 rating, which means it’s considered a moderate credit risk. A new round of stock repurchases could provide a bump for Discovery’s shares. They’ve appreciated about 5% over the last 12 months, under-performing the Standard & Poor’s 500, which was up about 17%.

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