Paramount Skydance has launched a significant debt offering exceeding $44 billion in both US dollars and euros to fund its acquisition of Warner Bros. Discovery. This bond sale is the centerpiece of a larger $51.9 billion financing plan that also includes $7.5 billion in term loans marketed last week. Bank of America and Citigroup are leading the investor calls for the offering.
The $44.4 billion offering is divided into approximately $32 billion of investment-grade debt and an equivalent of $12.4 billion in high-yield (junk) bonds. The investment-grade portion includes eight US dollar tranches with maturities ranging from 2 to 40 years. The high-yield component features a two-part euro tranche maturing in 5 and 8 years, and three US dollar notes due in 5, 8, and 10 years, with early yield discussions for the 10-year US dollar high-yield notes around the low 9 percent area. This high-yield offering is expected to be the largest corporate junk bond sale on record.
The proceeds from this bond sale, along with cash on hand, existing term loan financings, and equity financing, will be used to cover the $78 billion cash consideration payable to WBD common stockholders, including a $31 per share payout and other closing payments. The merger will result in the combined company carrying over $80 billion in long-term debt, with annual interest expenses projected to exceed $6 billion. Paramount anticipates achieving $6 billion in synergies across the combined entity to help manage this debt burden.
Despite the current challenging market conditions, with Treasury yields at multi-decade highs, Paramount is pushing forward with this financing. The company has set a $49 billion bridge loan as contingent financing, should the permanent financing not be in place by the deal's expected closing date of October 6. The company aims for the new entity to reach investment-grade credit metrics within three years, supported by projected cost savings. The bond and loan pricing is expected to be finalized by Wednesday.
