Fitch cuts Skydance credit rating as Paramount-WBD merger closes with about $80bn debt

Mixed · 2Fitch Ratings downgraded the credit rating of the new Skydance, the combined Paramount and Warner Bros. Discovery, citing "significant execution and integration risks" and materially higher leverage. 1 2 Mixed · 2Variety reports Fitch's note was issued Monday, a day before the deal closed, and lowered the long-term issuer default ratings from BB+ to BB, one notch deeper into non-investment grade ("junk") territory. Deadline gives the date of the downgrade as both Tuesday and Monday evening. 2 1 Mixed · 2The combined company starts with around $80 billion in debt after what Deadline calls one of the biggest leveraged buyouts in corporate history. Variety calls the level nearly unprecedented for a large media deal. 1 2

Mixed · 2Fitch projects leverage of 7.8x in fiscal 2026, falling to 6.2x in 2027 and 4.5x in 2028. It doubts the company can achieve the synergies its deleveraging target depends on, and says the company faces structural pressure on linear revenues, streaming competition and hit-driven content risk. 1 2 Centre · 1The Ellison family has committed to cut net leverage below 3.75x in fiscal 2028 and 3.0x in fiscal 2029. Fitch believes this would need debt repayment through equity issuance or asset sales as well as synergies and free cash flow. Its base case excludes equity-funded debt reduction and asset sales, which it says could speed deleveraging. 1 Centre · 1Skydance said at closing that it is "built on a strong financial foundation". It has nearly $70 billion in revenue and targets more than $6 billion in cost savings. Executives said most savings would not come from layoffs, though co-CEOs Ellison and Ynon Kreiz told staff the integration would bring "difficult decisions that effect our workforce". 1

Centre · 1Deadline reports a $42.5 billion bond sale over the past week as part of a $52 billion debt financing. It says this raises annual interest expense by up to $500 million more than first expected, with rates on some notes above 9%, partly offset by Treasury hedges according to sources. It attributes some of the added cost to the delay caused by state attorneys general led by California's Rob Bonta, who sued to block the merger before a settlement. 1 Left · 1Other agencies' positions are described differently. Variety says Moody's rated the debt Ba3 on Sept. 29 and that S&P on Oct. 2 gave slightly higher ratings in line with Fitch's, with neither issuing a new evaluation since. Deadline says Fitch's move followed a similar S&P downgrade in late September. 2