Paramount Debt Deal Clears Path for David Ellison’s Warner Buyout
Paramount Skydance Corp completed a US$52bil debt sale across markets to fund its acquisition of Warner Bros Discovery Inc, according to reports. The massive financing clears the path for David Ellison to close the US$110bil buyout, though higher global borrowing costs have left the company facing substantially elevated interest bills.
The compressed timeline required Paramount to push through multiple markets in just a week. The company and its banking partners issued both high-grade and junk bonds to secure the huge sums needed for the transaction. Dennis Cinelli, Paramount’s chief financial officer, described the acquisition as a strategic, long-term investment in reshaping the media industry.
How the US$57.5 Billion Bridge Financing Unraveled and Restarted
The corporate transaction originated in February when Paramount outbid Netflix Inc for Warner Bros Discovery Inc. Bank of America Corp, Citigroup Inc, and Apollo Global Management Inc provided a US$57.5bil short-term loan as one of the largest bridge financings in history. The underwriting banks subsequently sold portions of the debt to reduce their own exposure.
Lawsuits from state attorneys general and a writers union stalled the merger in July. Treasury bond yields climbed while credit spreads widened during the delay. SoftBank Group Corp then launched a separate US$11.1bil junk bond offering aided by Citi, which temporarily strained high-yield market capacity. SoftBank wrapped up its borrowing on September 23, allowing Paramount to finalize its own debt package one day later to avoid late fees of US$7mil a day tied to a September 30 closing deadline.
Rising Interest Costs and Investor Pushback in Global Markets
Higher global borrowing conditions mean Paramount’s annual interest expenses will run US$250mil to US$500mil above earlier projections. Instant trading weakness in the newly issued debt generated complaints from investors sitting on paper losses. Paramount shares dropped nearly 10% on Thursday as the financing wrapped up, remaining flat during Friday midday trading in New York.
To keep debt under control, the company intends to cut US$6bil a year from operating expenses. Chief Executive Officer David Ellison privately assured credit-rating agencies that family wealth would be deployed if necessary to support the deleveraging effort. S&P Global Ratings monitored the commitments as the transaction advanced toward completion.
