Home / Business and Economy / Paramount Faces S&P Downgrade Watch for WBD Deal
Paramount Faces S&P Downgrade Watch for WBD Deal
3 Mar
Summary
- S&P Global placed Paramount on negative outlook due to WBD acquisition.
- The deal's financing could push Paramount's debt load beyond downgrade threshold.
- Successful merger could provide valuable IP and content library for streaming.
S&P Global has issued a negative outlook for Paramount, signaling a potential credit rating downgrade. This cautionary move is directly linked to Paramount's pursuit of a merger with Warner Bros. Discovery (WBD).
The ratings firm estimates the transaction could cost $111 billion, including WBD's debt and a significant termination payment to Netflix. S&P's primary concern is that Paramount's debt load may surpass a critical threshold of 4.25x after financing the acquisition and investing for growth.
Paramount has offered a daily ticking fee to WBD shareholders, potentially adding substantial costs quarterly if the transaction extends beyond September 30, 2026. S&P is adopting a wait-and-see approach, expecting Paramount to demonstrate financial improvements.
However, S&P Global also noted a potential upside: if the merger and integration are successful, the combined entity would possess a premier collection of intellectual property and the world's largest film and television content library. This could bolster its streaming competition and offset declines in linear TV business.
