Paramount Is Pulling Every Lever to Sell LBO Debt

(Bloomberg) — Paramount Skydance Corp. stretched, then stretched, then stretched again in its audacious $110 billion takeover bid for Warner Bros. Discovery Inc.

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Now the companies’ bankers — and even the billionaire Ellison family itself — are doing the same as they prepare to bring the massive $50 billion debt sale for the buyout to market.

On the Warner Bros. side, a JPMorgan Chase & Co.-led bank group seized on red-hot demand for leveraged loans to save hundreds of millions of dollars in interest costs by refinancing a $15 billion bridge loan with longer-term debt. The lenders boosted the transaction’s size twice in a week, making it the largest so-called term loan B ever to hit the market, according to data compiled by Bloomberg.

Warner Bros.’ credit grade, on the higher end for junk-rated borrowers, coupled with scarce supply of new leveraged loans, helped garner more than $30 billion of orders from investors, according to people with knowledge of the transaction.

Paramount, meantime, has been working to convince credit-rating firms that it’ll keep its debt load contained enough to merit investment grade ratings on some of its obligations — a crucial step to cap financing costs that could otherwise overwhelm the combined entity. Chief Executive Officer David Ellison pledged that his family would do what it takes to keep Paramount’s leverage in line with forecasts.

Combined, the efforts speak to the remarkable nature of Paramount’s move to consolidate two of Hollywood’s largest legacy media companies. They also show how, even after pulling out seemingly every stop to knock Netflix Inc. out of the running, including guaranteeing the deal with Larry Ellison’s $247 billion personal fortune, the companies and their bankers are still eying every lever to pull to ensure the mega-merger’s success.

“Markets have anticipated these financings for months, but the structure is exceptionally complex,” said Grant Nachman, Chief Investment Officer at Shorecliff Asset Management. “Elements of M&A acquisition financing, a media-sector LBO, and a liability management exercise all wrapped into one.”

Paramount’s LBO financing is shaping up as one of the biggest tests of demand in the credit markets this year. Its success hinges in no small part on securing investment grade ratings on some of its debt, which is why Ellison privately tried to assuage wary credit analysts that he and his family would do whatever it takes to slash debt at the combined company.

S&P considered the verbal pledge to be a tacit promise to inject additional capital if needed to maintain the company’s debt standing. The credit graders, facing deal skeptics who labeled post-merger leverage levels “frightening,” pushed for that commitment to be made public. Last week, Paramount disclosed the pledge in a regulatory filing.

Bank of America Corp. and Citigroup Inc.-led banks are talking to investors about the makeup of the debt package backing the M&A, the people familiar said. The financing is tentatively structured as about $30 billion of high-grade bonds, $12 billion in high-yield notes and $7.5 billion in loans, but that could change, they said. The timing of the debt sale is yet to be finalized, one of the people added.

“The high-yield component of this is probably the one the market’s going to have to evaluate a little closer and figure out what that supply feels like,” said Brett Kozlowski, a portfolio manager at GW&K Investment Management.

Still, credit markets are about as busy as they have been all year, with higher borrowing rates boosting demand for floating-rate debt like leveraged loans. May was the busiest month since January for leveraged loans. Junk bond issuance in the US is at its highest in five years, and up more than 35% on the same period in 2025, according to data compiled by Bloomberg.

Overall, some investors say market conditions are too favorable for buyers to be scared away from at least nibbling at a big deal like Paramount.

“Given the lack of new issue supply, loans rated BB that are priced right will get gobbled up quickly,” said Michael Marzouk, a senior managing director at Aristotle Pacific Management.

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Week In Review

Apollo and Blackstone are working to bring additional investors into a roughly $36 billion debt financing deal to help Anthropic build out its AI infrastructure. Anthropic also recently raised $65 billion in a funding round that valued the AI company at $965 billion including the new investment, eclipsing rival OpenAI’s value for the first time.
- IREN, a company that builds and operates data centers for training AI models, borrowed about $3.6 billion to provide computing capacity to Microsoft.
- Pimco’s leveraged finance chief David Forgash urged investors to be cautious with high-yield debt financing data centers, where winners and losers are starting to emerge as issuance booms.
BNP Paribas strategists tightened their year-end spread forecasts, projecting US high-grade spreads at 69 basis points, down a few basis points from current levels. The credit markets are still in a favorable mid-cycle environment and investors should stay constructive rather than fade the recent rally, strategists including Viktor Hjort wrote in a report dated Friday.
Ares Management and MetLife have clashed over the restructuring of Eagle Football, which owns stakes in several football teams, including the storied French club Olympique Lyonnais, after the group racked up big debt. Now lenders including MetLife are being asked to wait longer to get repaid.
European lenders are selling Additional Tier 1 bonds with long call dates at a record pace, seizing ultra-favorable conditions in the market for risky bank debt to fix costs for a decade.
Shutterfly, a photo-sharing website, is looking to refinance its looming debt pile with $1.875 billion of new junk bonds and loans.
Redemptions from private credit funds for retail investors known as business development companies are likely to continue for the next two quarters, Apollo Global’s president Jim Zelter said.
The US government has joined the line of creditors impacted by alleged fraud at bankrupt auto-parts maker First Brands, in this instance for accusations the company cheated on how much it should have paid on tariffs.

On the Move

Gerard Gorski is joining Morgan Stanley as a senior trader on the macro credit desk after more than two decades at Goldman Sachs. He’s expected to start later this summer.
Colin Dano, a credit trader and director at RBC Capital Markets, is leaving to join the investment-grade credit trading desk at Bank of Montreal in Toronto.
Credit investor Silver Point Capital appointed Eldar Pius as its head of European capital markets, based in London. Pius was a managing director at Strategic Value Partners, where he was responsible for European financing and capital markets activity.