Paramount pulls every financing lever for $50 billion debt-funded Warner Bros. deal

NEW YORK: Paramount is going all-in on financing as it seeks to pull off one of the biggest media deals in recent memory. Paramount Skydance and its banking partners are assembling a financing package worth nearly $50 billion to support the company’s proposed $110 billion acquisition of Warner Bros. Discovery, according to a Bloomberg report. If completed, the debt raise would rank among the largest leveraged buyout financing exercises seen in recent years.

The financing effort reflects the sheer scale of a deal that would bring together two of Hollywood’s most prominent entertainment companies, combining major film studios, television networks and streaming assets under a single corporate umbrella.

On Warner Bros. Discovery’s side, lenders led by JPMorgan Chase have already refinanced a $15 billion bridge facility through longer-term borrowings. Strong investor demand allowed the offering to be expanded twice within a week, ultimately making it the largest term loan B transaction brought to market.

Investor appetite has remained robust despite the size and complexity of the proposed acquisition. More than $30 billion worth of orders were reportedly placed for Warner Bros. Discovery-related debt, helped by the company’s established credit profile and a limited supply of new leveraged loan opportunities in the market.

Meanwhile, Paramount has been working closely with credit rating agencies as it seeks investment-grade ratings for parts of the financing package. Securing those ratings could significantly lower borrowing costs and broaden the pool of potential investors.

Paramount Skydance chief executive officer David Ellison has publicly committed to maintaining manageable debt levels at the combined company. According to reports, the commitment includes support from the Ellison family to ensure leverage remains in line with financial projections if additional capital is required.

The transaction is backed by the financial resources of Larry Ellison and follows a competitive bidding process that ultimately positioned Paramount ahead of rival suitors.

The financing structure under discussion is expected to include approximately $30 billion in investment-grade bonds, $12 billion in high-yield debt and about $7.5 billion in loans, although bankers are still refining the final mix and timing of the offering.

Shorecliff Asset Management chief investment officer Grant Nachman described the proposed structure as a blend of acquisition financing, leveraged buyout funding and liability management techniques, highlighting its complexity and scale.

While investor demand appears healthy, some market participants are expected to take a closer look at the riskier portions of the package. GW&K Investment Management portfolio manager Brett Kozlowski noted that the high-yield segment is likely to attract greater scrutiny from investors assessing the long-term debt burden of the combined company.

The financing push comes at a favourable moment for debt markets. Leveraged loan issuance accelerated during May, while US junk bond sales reached their highest levels in five years, creating a supportive backdrop for large-scale fundraising efforts.

Aristotle Pacific Management senior managing director Michael Marzouk said strong investor demand and limited supply of new deals could work in Paramount’s favour, provided the debt is priced attractively.

For now, the spotlight is shifting from Hollywood to Wall Street. Before Paramount can rewrite the script for the entertainment industry, it must first convince investors to bankroll one of the biggest takeover stories of the decade.