Even if Paramount Skydance manages to take over Warner Bros. Discovery against the company¡¯s will, it faces another high hurdle: coping with the colossal $54 billion of debt it¡¯s planning to take on.
Paramount has a temporary financing package in place for the combined company, but it hasn¡¯t locked in a maximum rate on more permanent borrowings for the transaction. The result could be the M&A world¡¯s version of a big-budget Hollywood fiasco, with Paramount¡¯s expenses spiraling beyond what it planned if debt markets sour and funding costs surge.
To get the financing, Paramount is pitching itself to credit markets as an aspiring member of Corporate America¡¯s royalty ¡ª an investment-grade borrower entitled to cheaper interest rates and underwriting fees. Paramount must deliver a long to-do list of cost cuts and efficiency savings to earn that blue-chip status.
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