S&P Global Ratings already has placed Paramount Skydance‘s credit rating in junk-status territory — indicating that the media conglomerate’s debt securities are considered speculative-grade. But if and when Paramount completes its megadeal for Warner Bros. Discovery, the credit-rating firm will take it down another notch.
Currently S&P Global has a “BB+” issuer credit rating on Paramount. On Wednesday, the firm said it will “lower the issuer credit rating on PSKY to ‘BB’ when its acquisition of WBD closes, assuming no material changes to the structure or terms of the transaction due to regulatory considerations, our view of the media ecosystem, or the company’s competitive position due to geopolitical factors or secular pressures.”
S&P Global defines the “BB” rating like this: “A BB credit rating indicates that an entity is less vulnerable in the near term, but faces major ongoing uncertainties. This rating reflects a speculative nature, suggesting that the entity may be more impacted by economic downturns or other adverse conditions. While BB-rated entities might currently manage their obligations, investors should be cautious due to potential volatility.”
With the WBD deal, Paramount will assume the roughly $30 billion in net debt that Warner Bros. Discovery has on its books. That’s in addition the tens in billions of debt it is amassing to fund the merger itself. In April, Paramount restructured the financing for the deal, reducing its aggregate long-term debt commitments from $54 billion to $49 billion — but that still would leave the combined Paramount-WBD in a highly leveraged position.
