Paramount Launches $44.4 Billion Bond Sale to Acquire Warner
Paramount Skydance has announced the launch of a bond issuance equivalent to approximately $44.4 billion to acquire Warner Bros. Discovery and repay part of its existing debt. Bank of America and Citigroup hosted an investor call on Monday. The company stated that the target includes senior secured notes in U.S. dollars, as well as second-lien secured notes denominated in both U.S. dollars and euros, aimed at qualified buyers under Rule 144A and Regulation S. The completion of the issuance is subject to market conditions, and the bond settlement is not a prerequisite for the acquisition settlement.
The structure breaks down into approximately $32 billion of investment-grade bonds and about $12.4 billion of equivalent junk bonds. The junk bonds include two tranches in euros with five-year and eight-year maturities, as well as three tranches in U.S. dollars with five-year, eight-year, and ten-year maturities; the initial pricing for the ten-year U.S. dollar tranche is around 9%. There is also a possibility of launching additional investment-grade bonds with maturities ranging from two to forty years, up to a maximum of eight tranches. Last week, a $7.5 billion equivalent secured term loan B was initiated, split into $6.5 billion in U.S. dollars and $1 billion equivalent in euros, with a seven-year term and minimal financial commitments, initially priced at S/E+275 to 300, with a quote of 99.5, and the subscription deadline is September 30. Together with the previously initiated $5 billion term loan A, the total debt financing package amounts to approximately $52 billion.
The acquisition agreement was finalized on February 27, with a cash price of $31 per share, giving an equity value of approximately $81 billion and an enterprise value of about $110 billion, equivalent to 7.5 times the 2026 EBITDA (including synergies). The estimated synergy effect exceeds $6 billion. After the settlement, net debt is expected to be around $79 billion to $80 billion, with leverage of about 4.3 times (including synergies). On the equity side, commitments have been made by the Ellison family and RedBird, with Larry Ellison's personal guarantee previously disclosed at approximately $46.7 billion; additional commitments have been made by sovereign funds from Saudi Arabia, Qatar, and the UAE. The company has already paid a $2.8 billion breakup fee from a previous deal with Netflix. Reports indicate that orders for the junk bonds exceeded $23 billion on Monday morning, covering the tranche size. The sellers aim to clear the bridge financing for the acquisition, while buyers are credit funds chasing the 9% yields on senior and second-lien notes. The event is driven by the largest merger financing opening this year, with funds shifting from loan commitments to public bonds. Beneficiaries are high-yield accounts locking in yields, while the pressured party is the entity that must cover nearly $80 billion in net debt with content and advertising cash flows after the merger.
Source: Public Information
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The $44.4 billion bond issuance is a transition from a cash acquisition signed in February from bank bridge financing to the public credit market. The entity formed by the merger of Skydance and Paramount will use senior and second-lien debt to fully acquire Warner Bros. Discovery, in addition to the $7.5 billion loan B and $5 billion loan A. The 9% inquiry for the ten-year U.S. dollar junk bonds indicates that the market is not offering an investment-grade media premium, but rather a leveraged buyout price. The orders covering the junk bond tranche only prove that the interest rate is high, not that the leverage can cycle through a content downturn.
The capital path involves the Ellison family's equity backing, Gulf sovereign funds co-investing, and Bank of America and Citigroup selling the bonds to institutions. The $31 cash price pulled Warner out of the bidding war with Netflix, and the $2.8 billion breakup fee has been paid. The $6 billion synergy is used to justify the 7.5 times EBITDA and 4.3 times leverage, but the synergies need to be realized in streaming, advertising, and production lines, with bond interest accruing from the settlement date. Commitments from Saudi Arabia, Qatar, and the UAE connect Hollywood assets with Gulf capital, and regulatory and content independence clauses become political concessions that must be maintained post-settlement.
In comparison, Disney's acquisition of Fox in 2019 utilized relatively thicker cash flows and lower interest rates, while the leverage from the merger of Discovery and WarnerMedia has long pressured streaming losses. The industry phase sees traditional film and television groups using debt to consolidate libraries, news channels, and streaming subscribers to counter tech platform distribution. The editorial independence committees of CBS and CNN, along with increased U.S. production, are antitrust exchange conditions, not growth engines. The nearly $80 billion net debt post-merger turns the content library from a product into a debt collateral.
The structural judgment belongs to capital concentration. The mechanism is that cheap bridge commitments expire and must be replaced with public bonds; the coupon is determined by ratings (company BB/Ba3/BB, loan facilities or up to BBB-) and maturity structure. Whoever buys the ten-year 9% second-lien bonds is betting on whether the $6 billion synergy will materialize on time. Pricing power shifts from the production set and subscribers to the bond market's discounting of media cash flows. If interest rates rise again, subsequent refinancing will first consume the synergies; if rates stabilize, the merged entity will still need layoffs and library amortization to cover interest.
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The cash price of the acquisition is ultimately settled by the bond market's coupon.
Synergies are written in the roadshow, while interest is recorded on the settlement date.
Once the content library is mortgaged to the bonds, the film slate becomes a debt repayment schedule.