Standard & Poor’s places Paramount on negative credit watch

Paramount Skydance has been placed on watch by S&P Global for a possible credit rating downgrade after the studio beat out Netflix with a $31 per share offer to merge with Warner Bros. Television. Discovery.

The ratings company has revised its outlook for Paramount to negative, affirming its BB+ credit rating, on the basis that Paramount will likely see its debt load grow beyond the red line for a potential downgrade. “Although the company has not yet provided full details on how it will finance the deal, which we estimate will cost $111 billion (including the assumption of WBD’s debt and a one-time $2.8 billion termination payment to Netflix), we believe the purchase will increase its leverage well above the 4.25x downgrade threshold for the current rating,” S&P said in a statement Tuesday.

The rating company’s warning posits that Paramount will have to take on significant debt to acquire WBD, and as it invests for growth, it will also have to cut interest and borrowing expenses.

“We note that S&P Global’s adjusted leverage, which includes our adjustments to operating leases and restructuring charges and is net of cash, as of December 31, 2025 was 4.8 times. PSKY has offered WBD shareholders a daily registration fee beginning after September 30, 2026, until the transaction closes, which could add $650 million per quarter in additional costs to the transaction,” S&P added in its commentary.

The rating company has a wait-and-see attitude toward Paramount demonstrating operational and financial performance improvements over time.

“If (Paramount) successfully completes the merger and integration, we will likely view the format company more favorably because it will own an enviable portfolio of intellectual property rights and the largest library of film and television content in the world. This would provide the company with the content and library to compete in the global streaming space and perhaps help offset declines in its linear television business,” S&P said.

The rating company said it could lower its credit rating on the issuer by at least one notch, depending on how Paramount handles WBD in its fold and how it reduces its overall debt load to do so.

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