Fitch Downgrades Paramount Skydance Debt Rating After Warner Bros. Discovery Acquisition

Fitch Ratings downgraded Paramount Skydance Corp.'s (PSKY) debt rating to BB-plus from its previous BBB-minus, which was the lowest investment-grade rating.

This action reflects the significant increase in borrowings associated with the company's $110 billion acquisition of Warner Bros. Discovery Inc. (WBD).

Market Impact

Paramount shares declined over 8%, reaching as low as $12.25 in New York trading, following the announcement.

Deal Overview

Paramount agreed to acquire Warner Bros. last week for $31 per share. The merger is projected to result in the combined entity carrying $79 billion in net debt.

Fitch's Rationale

Fitch stated that the downgrade also considers competitive pressures across the media sector and anticipated pressure on free cash flow from transformation costs. The ratings service indicated that improvements in leverage and free cash flow might take longer than previously expected. Paramount remains on negative watch pending further details regarding deal terms, financing arrangements, and deleveraging efforts.