TLDR
- Paramount Skydance stock dropped as much as 9% before settling around a 5% decline, even after a federal judge cleared the final antitrust hurdle to its Warner Bros. Discovery deal.
- The company priced $41.4 billion in senior secured notes and an $8.5 billion term loan to fund the acquisition, a sum that dwarfs its own market cap.
- S&P Global Ratings downgraded Paramount Skydance to “BB” from “BB+,” pointing to leverage near 7.6 times EBITDA through 2027.
- The merger is expected to close October 6, with Ynon Kreiz named co-CEO of the combined company.
- Warner Bros. Discovery stock stayed flat near $30.96, while Netflix dipped 2% as the media landscape braces for a bigger combined rival.
Paramount Skydance (PSKY) stock tumbled Wednesday, falling as much as 9% intraday before paring to a 5% loss, trading around $9.80. The drop came on a day that should have been good news for the company.
Paramount Skydance Corporation Class B Common Stock, PSKY
A federal judge approved a multistate antitrust settlement, clearing the last legal roadblock to Paramount Skydance’s purchase of Warner Bros. Discovery (WBD). Instead of celebrating, investors zeroed in on how much the deal will cost.
That cost comes in the form of debt. Paramount Skydance priced $41.4 billion in senior secured notes, split across first and second lien tranches plus euro-denominated notes, alongside an $8.5 billion term loan.
For context, that figure dwarfs the company’s own market capitalization of roughly $10.77 billion. It’s a lot of leverage for one deal.
S&P Global Ratings didn’t love the math either. The agency downgraded Paramount Skydance’s issuer credit rating to “BB” from “BB+,” projecting leverage will start around 7.6 times EBITDA and hold near that level through 2027.
Debt Load Meets a Tougher Rate Environment
Timing hasn’t helped. The 10-year Treasury yield climbed to around 5.33%, its highest mark since 2002, making that fresh debt pile more expensive to carry.
The broader market wasn’t struggling the same way. The S&P 500 rose about 0.3% and the Nasdaq added roughly 0.25% on tech strength, meaning PSKY’s slide was very much its own story, not a market-wide one.
Analyst reaction was split. Needham kept a Hold rating, flagging net debt above 4x EBITDA post-synergies as its main worry. Citizens stayed more upbeat, maintaining a Market Outperform rating and a $14 price target, pointing to Ynon Kreiz’s appointment as co-CEO of the combined company as a plus.
The deal’s legal path is now clear. Judge Araceli Martinez-Olguin accepted the consent decree in a case brought by state attorneys general who argued the merger would concentrate power over theatrical films and television channels.
Paramount Skydance says it still expects to close the Warner Bros. Discovery acquisition on October 6.
What the Court Order Requires
The approval isn’t free of strings. The decree sets annual theatrical release minimums, a domestic production spending floor, and a ban on selling or closing the Paramount and Warner Bros. studio lots.
It also requires separate cable-distribution negotiations for each portfolio and an editorial independence board for CBS News and CNN. Those terms limit how aggressively the company can cut costs to manage its new debt in the years ahead.
On the other side of the deal, Warner Bros. Discovery stock barely moved, holding near $30.96. That’s typical for a target this close to a deal closing, there isn’t much left to react to.
Netflix stock slipped 2% to $68.34, trading lower alongside the wider communications sector. The Communication Services Select Sector SPDR ETF fell 0.7%, while the broader SPDR S&P 500 ETF Trust eased just 0.2%.
Walt Disney now watches a bigger combined rival take shape, one pairing two major studios, two newsrooms, and two cable portfolios. For now, all eyes are on October 6, the date Paramount Skydance expects the merger to officially close.
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