Fitch downgraded Paramount to junk status due to its deal with Warner Bros.
4 March 04:13
International rating agency Fitch Ratings has downgraded Paramount Skydance Corp.’s long-term credit rating to speculative grade “BB” from investment grade “BBB-“. The reason for this was the announced acquisition of Warner Bros. Discovery (WBD), which will significantly increase the company’s debt burden, according to "Komersant Ukrainian".
A “BB” rating means a transition to non-investment, or so-called “junk” status, signaling increased credit risks.
Why Fitch downgraded Paramount
Fitch noted that the deal involves a large-scale raising of debt capital. According to the agency’s estimates, the debt level of the combined structure could rise sharply.
It is expected that:
- the company will use $58 billion in credit obligations, including a $3.5 billion revolving credit facility;
- the combined company’s net debt could reach approximately $79 billion;
- the integration of two large media groups will require significant additional costs.
Fitch has also placed the ratings on negative watch, not ruling out further downgrades.
Details of the Paramount-Warner deal
Paramount offered Warner Bros. Discovery shareholders $31 per share and provided for a quarterly bonus payment of $0.25 per share after September 30, 2026, if the deal is not closed by that date.
The deal is valued at approximately $81 billion (in broader estimates, over $100 billion including debt).
In addition:
- Paramount has committed to pay $7 billion if the deal is blocked by regulators;
- compensation of $2.8 billion is provided for, which Warner must transfer to Netflix for terminating previous agreements.
Previously, Netflix had planned to acquire WBD, but the board of directors of Warner Bros. Discovery considered Paramount’s offer more advantageous.
What does a “junk” rating mean?
A BB rating means:
- a higher probability of default;
- an increase in the cost of borrowing;
- increased investor attention to the company’s financial stability.
Fitch explained its decision not only by the debt burden, but also by:
- high competitive pressure in the media sector;
- weak free cash flow performance;
- significant costs of business transformation.
Market reaction and other rating agencies
Fitch’s decision came after Moody’s and S&P Global placed Paramount on review for a possible downgrade due to uncertainty surrounding the deal.
Analysts point to the following risks:
- complex financing structure;
- possible antitrust investigations;
- integration difficulties in merging two large media structures.
How much is the deal worth?
According to reports, Paramount is prepared to:
- cover the insurance payment of over $2 billion that Netflix was supposed to receive due to the breakdown of the previous agreement;
- pay Warner Bros an additional $7 billion;
- The total market value of Warner Bros. shares exceeds $82 billion.
If the deal goes through, it will be one of the largest media mergers in recent years.
Political context
In the US, corporate bidding between Netflix and Paramount was called “a choice between two bad scenarios.”
Critics feared that:
- Netflix could strengthen its dominance in streaming and hit the traditional film industry;
- Paramount has close ties to the administration of US President Donald Trump, raising questions about political influence on the media market.
Trump’s opponents have previously accused him of aggressive rhetoric toward the media and pressure on freedom of speech.
A businessman close to Trump could gain control of CNN
Warner Bros. Discovery owns the rights to a large archive of films and TV series that have been made in Hollywood over nearly 100 years. The company also owns franchises such as Harry Potter, Lord of the Rings, Game of Thrones, as well as the HBO Max streaming service and CNN and Discovery TV channels. Paramount CEO David Ellison said that by combining two “world-class studios,” the company will create “even greater value for viewers, partners, and shareholders.”
Since 2025, Paramount has been owned by the Ellison family, which is said to be close to US President Donald Trump. Larry Ellison is the founder of Oracle, a technology corporation that is one of the key players in the database and cloud technology market and a major contractor to the US government. In particular, Oracle supplies critical IT infrastructure to the Pentagon.
The new agreement to purchase Warner Bros. Discovery must now be approved by antitrust regulators. In this case, Paramount will, in particular, gain control of CNN, which Donald Trump has repeatedly accused of spreading “fake news” about himself and his administration.
