S&P Puts Paramount Skydance Negative Credit Watch
Paramount Skydance was placed on review by S&P Global for a possible downgrade of its credit rating after the studio prevailed against Netflix with a $31 per share offer to merge with Warner Bros. Discovery.
The rating company revised its outlook for Paramount to negative, while affirming its BB+ credit rating, on the grounds that Paramount will likely see its debt load rise above a redline in preparation for a possible downgrade. “While the company has not yet provided full details on 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 fee 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 Tuesday.
The ratings company’s caution assumes Paramount will need to take on substantial debt to acquire WBD and, while investing for growth, will also need to reduce its interest expense and borrowings.
“We note that S&P Global’s adjusted leverage, which includes our adjustments for operating leases and restructuring charges and is net of cash, as of December 31, 2025 was 4.8x. PSKY offered WBD shareholders a daily fee starting September 30, 2026, until the transaction closes, which could add $650 million each quarter in incremental costs to the transaction,” S&P added in his comment.
The ratings company has a wait-and-see attitude toward Paramount in order to show improvements in its operational and financial performance over time.
“If (Paramount) successfully completes the merger and integration, we would likely view the company pro forma more positively as it would have an enviable collection of marquee intellectual property and the largest library of film and television content in the world. This would provide the company with the content and library needed to compete in the global streaming space and could potentially help offset the decline of its linear television business,” S&P argued.
The ratings firm said it could lower its issuer credit rating by at least one notch, depending on how Paramount fares with WBD in its fold and how it reduces its overall debt load to do so.
