Paramount Skydance is adding another major piece to the financing behind its Warner Bros. Discovery takeover.
The company said Thursday that it has launched syndication of a proposed $7.5 billion senior secured Term B loan, with the proceeds intended to help fund the Warner Bros. Discovery acquisition and refinance existing debt. The financing is still subject to market conditions, meaning the final interest rate, maturity and other terms have not yet been locked in.
The headline number is eye-catching, but the $7.5 billion should not be viewed as an entirely new surprise bill attached to the merger. Paramount has been working for months to replace a huge temporary bridge-financing package with longer-term debt before the transaction closes.
The $7.5 billion loan is only one part of a much bigger debt package
When Paramount and Warner Bros. Discovery announced their agreement in February, the companies valued the transaction at $81 billion in equity value and $110 billion including debt. Paramount said the acquisition would be backed by $47 billion of new equity, supported by the Ellison family and RedBird Capital Partners.
The debt side is considerably more complicated.
Paramount previously secured a $49 billion bridge loan facility, designed as temporary financing that could be replaced with permanent loans and bonds before or around closing. SEC filings also detail two additional $2.5 billion Term A loans tied to the transaction.
Thursday’s $7.5 billion Term B loan is part of that effort to turn short-term deal commitments into a more durable capital structure.
Paramount also said it expects to raise roughly $44.4 billion in additional secured debt beyond this proposed Term B facility and previously announced financing. Those funds, combined with cash and equity financing, are intended to complete the Warner Bros. transaction and repay certain borrowings.
So the important story is not simply that Paramount suddenly needs another $7.5 billion. It is that one of Hollywood’s largest-ever media acquisitions is entering the stage where enormous underwriting commitments have to become real loans and bonds held by investors.
The combined company will begin life carrying heavy debt
That financing will leave the merged Paramount-Warner Bros. company with a substantial balance sheet.
In an August SEC filing, Paramount estimated that, under assumptions tied to the merger financing, the combined business could have about $86.3 billion in total debt. The company explicitly warned investors that the increased leverage could affect its financial flexibility and that its ability to service the debt will depend on future cash flow and access to refinancing.
Paramount has presented a more optimistic long-term picture. Its merger materials project more than $6 billion in synergies, including savings from technology consolidation, procurement, real estate and other operating efficiencies. It has said the combined company should start around 4.3 times net debt to EBITDA on a fully synergized basis, with a goal of reaching investment-grade credit metrics within three years.
That makes debt reduction one of the biggest financial challenges David Ellison will inherit after closing.
The company will not only have to combine Paramount+, HBO Max, CBS, CNN, Paramount Pictures, Warner Bros., DC and other assets; it will also have to show lenders and bondholders that those businesses can generate enough cash to support the capital structure used to put them together.
Paramount is under pressure to get the deal closed
The financing move comes just days after Paramount cleared one of the transaction’s remaining major legal obstacles.
Paramount and Warner Bros. Discovery reached a settlement with California and 11 other states that had challenged the merger. The agreement includes commitments to release at least 30 theatrical movies annually during the first two years, rising to 32 in later years, as well as at least $1.5 billion in additional U.S. production spending over five years.
There is also a financial incentive not to let the process drag on.
Under the merger agreement, if the acquisition has not closed after September 30, Warner Bros. Discovery shareholders begin receiving an additional “ticking fee” calculated daily from a payment equivalent to 25 cents per share per quarter. Paramount disclosed that mechanism when the definitive agreement was announced.
That puts the latest $7.5 billion financing in context.
For moviegoers, the merger is about what happens when franchises such as Harry Potter, DC, Mission: Impossible, Game of Thrones, Top Gun and SpongeBob SquarePants end up under one corporate roof. For Paramount, the immediate challenge is much less glamorous: finding investors willing to finance one of the largest debt loads Hollywood has ever assembled.
