Paramount Skydance Rating Downgraded to Speculative-Grade After Warner Bros. Discovery Acquisition
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S&P Global Ratings will downgrade Paramount Skydance's issuer credit rating to 'BB', placing it in speculative-grade territory, once its acquisition of Warner Bros. Discovery closes. Paramount will assume approximately $30 billion in net debt from Warner Bros. Discovery and is amassing tens of billions more to fund the merger. The combined company expects to achieve over $6 billion in cost synergies.
Facts First
- Paramount Skydance's issuer credit rating will be lowered to 'BB' after its Warner Bros. Discovery acquisition closes.
- Paramount will assume about $30 billion in net debt from Warner Bros. Discovery.
- The combined company expects over $6 billion in cost synergies from real estate, process improvements, and tech consolidation.
- S&P projects the leverage ratio will be 7.6x in 2026 and not drop below 5x until 2029.
- Paramount restructured financing in April, reducing long-term debt commitments from $54 billion to $49 billion.
What Happened
S&P Global Ratings stated that it will lower the issuer credit rating on Paramount Skydance (PSKY) to 'BB' once its acquisition of Warner Bros. Discovery (WBD) closes, provided there are no material changes to the transaction. Paramount currently holds a 'BB+' issuer credit rating from S&P Global. A 'BB' rating indicates an entity is less vulnerable in the near term but faces major ongoing uncertainties and is considered speculative-grade. Paramount will assume approximately $30 billion in net debt currently held by Warner Bros. Discovery and is amassing tens of billions of dollars in additional debt to fund the merger. In April, Paramount restructured the financing for the deal, reducing aggregate long-term debt commitments from $54 billion to $49 billion.
Why this Matters to You
The combined Paramount-WBD company includes the operations of six legacy companies: Time Warner, Discovery Communications, Scripps Networks, CBS, Viacom, and Skydance. S&P Global expects layoffs in the combined company will come largely from the consolidation of linear TV operations and the elimination of corporate overhead. This merger could affect the stability and offerings of major media brands you may watch or subscribe to. S&P projects the leverage ratio for the merged company will be 7.6x in 2026, suggesting the company's financial health may be strained for several years, which could influence its investment in new content and services.
What's Next
S&P Global expects cost synergies to come from real-estate rationalization, process improvements, and the consolidation of direct-to-streaming services. Paramount has assessed that it can achieve more than $6 billion in cost synergies by merging with Warner Bros. Discovery. S&P Global projects the Paramount-WBD leverage ratio will remain elevated for the next two years and will only begin to improve in 2028. On Tuesday, Paramount Skydance announced an offer to exchange WBD's junior-lien exchange notes for second-lien PSKY notes, and S&P Global assigned a preliminary 'BB' rating to Paramount's proposed second-lien secured notes.