Paramount Junk-Status Credit to Be Lowered With Warner Bros. Merger

Key Points:

• S&P Global Ratings currently rates Paramount Skydance’s credit at "BB+" but plans to downgrade it to "BB" once the Warner Bros. Discovery (WBD) acquisition closes, reflecting increased speculative risk.
• The combined Paramount-WBD entity will assume about $30 billion in WBD’s net debt plus additional debt from financing the merger, resulting in a highly leveraged position with projected leverage ratios remaining elevated until at least 2028.
• S&P Global warns that the deleveraging process could be slower than expected due to integration challenges, accelerating secular trends, and geopolitical or macroeconomic risks, noting the media sector’s history of difficult mergers.
• The firm acknowledges potential cost synergies of over $6 billion from the merger but will only factor these into credit analysis once realized, with expected EBITDA and free cash flow pressures in 2026 and 2027 due to integration costs.
• Paramount-WBD’s linear TV business faces declining revenue and will focus on margin management by cutting content costs, while layoffs and cost savings will largely come from consolidating TV operations, corporate overhead, real estate, and streaming platforms.