S&P Puts Paramount on Negative Credit Watch
#Paramount #Warner Bros. Discovery #S&P Global #Credit Rating #Negative Watch #Debt Leverage #Media Mergers #Streaming Competition
📌 Key Takeaways
- S&P placed Paramount on negative credit watch after its $31/share bid to merge with Warner Bros. Discovery
- The ratings firm affirmed Paramount's 'BB+' rating but revised outlook to negative
- The $111 billion acquisition will likely push Paramount's leverage above S&P's 4.25x downgrade threshold
- S&P could lower Paramount's credit rating by at least one notch depending on performance and debt reduction
📖 Full Retelling
S&P Global has placed Paramount Skydance on negative credit watch for a possible rating downgrade after the studio successfully bid $31 per share to merge with Warner Bros. Discovery, with the ratings firm warning the acquisition will likely increase the company's debt beyond acceptable thresholds. In a statement released on Tuesday, S&P affirmed Paramount's current 'BB+' credit rating but revised its outlook to negative, citing concerns that the estimated $111 billion transaction cost—including the assumption of WBD's debt and a $2.8 billion termination payment to Netflix—will push Paramount's leverage above the 4.25x threshold that would trigger a downgrade. The ratings firm emphasized that while Paramount hasn't provided complete financing details for the transaction, S&P's analysis suggests the purchase will significantly increase the company's leverage. As of December 31, 2025, Paramount's adjusted leverage was already 4.8x, and the studio has offered WBD's shareholders a daily ticking fee starting after September 30, 2026, which could add an additional $650 million each quarter in costs until the transaction closes. S&P noted that Paramount will need to take on substantial debt to acquire WBD while simultaneously working to reduce interest expenses and overall borrowings. S&P Global has adopted a wait-and-see approach, monitoring Paramount's operational and financial performance improvements over time. The ratings firm acknowledged that if the merger and integration are successfully completed, the combined entity could be viewed more positively due to its 'enviable collection of marquee IP and the largest library of film and television content in the world.' This content strength could help Paramount compete in the global streaming market and potentially offset declines in its traditional linear TV business. However, S&P clarified that it could lower Paramount's credit rating by at least one notch depending on the company's performance with WBD and its ability to reduce overall debt load.
🏷️ Themes
Corporate Finance, Media Mergers, Credit Ratings
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Share on Facebook Share on X Google Preferred Share to Flipboard Show additional share options Share on LinkedIn Share on Pinterest Share on Reddit Share on Tumblr Share on Whats App Send an Email Print the Article Post a Comment Paramount Skydance has been put on a watch by S&P Global for a possible credit rating downgrade after the studio prevailed against Netflix with a $31 per share bid to merge with Warner Bros. Discovery. The ratings firm has revised its outlook for Paramount to negative, while affirming its BB+ credit rating, on grounds Paramount will see its debt load likely grow beyond a red line for a possible downgrade. “While the company has yet to provide complete details around how it will finance the transaction, which we estimate will cost $111 billion (including the assumption of WBD’s debt and a one-time $2.8 billion termination payment to Netflix), we believe the purchase will increase its leverage well above our 4.25x downgrade threshold for the current rating,” S&P said in a statement on Tuesday. Related Stories Business Europe Won't Kill the Paramount-Warner Bros. Deal -- but It Could Make David Ellison Wait TV More Than a Quarter of HBO Max Subscribers in the U.S. Already Have Paramount+ The ratings firm’s caution assumes Paramount will have to take on substantial debt to acquire WBD and, while investing for growth, will also have to bring down its interest expense and borrowings. “We note that S&P Global adjusted leverage, which includes our adjustments for operating leases and restructuring charges and is net of cash, as of Dec 31, 2025 was 4.8x. PSKY has offered WBD’s shareholders a daily ticking fee starting after Sept. 30, 2026, until the transaction closes, which could add $650 million each quarter in additional costs to the transaction,” S&P added in its commentary. The ratings firm has a wait-and-see attitude towards Paramount to show operational and financial performance improvements over time. “If successfully completes the merger an...
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