Skydance opens with $80bn debt and a downgrade to BB
The new Skydance Corp. started life with about $80 billion in debt and a fresh downgrade.
Fitch Ratings cut the long-term issuer default ratings for Paramount Skydance, meaning its view of the company's ability to repay its borrowings, from BB+ to BB, according to Variety. Fitch published the note on Monday 5 October, a day before the Paramount-Warner Bros. deal officially closed.
Both grades sit below investment grade, the line lenders use to separate lower-risk borrowers from higher-risk ones. Fitch lists BB+ as its highest non-investment grade rating. BB is one step lower.
Fitch said the cut reflects materially higher leverage after the acquisition, meaning a heavier debt load set against earnings, plus significant execution and integration risks in joining two large organisations. That is a lot of debt to carry at once.
The agency also cited uncertainty about whether the company can deliver its stated synergies, meaning the planned cost savings and combined income that are meant to bring debt down. Fitch described those savings as material to its deleveraging target, meaning central to the plan to reduce borrowing.
Fitch pointed to three business pressures on the merged group: structural pressure on linear revenues, meaning money from traditional broadcast and cable channels; competition in streaming; and hit-driven content risk, meaning reliance on films and series finding an audience.
The unified company was renamed Skydance Corp., with its common stock beginning trading on the New York Stock Exchange after the deal closed. David Ellison is chief executive of Skydance.
Other agencies have taken a similar view. In a 29 September note, Moody's rated Skydance's debt overall at Ba3, one notch below investment grade. On 2 October, S&P Global calculated net debt to adjusted earnings, a measure of debt against underlying profit, at 7 times in 2026 and 2027, with a company goal to bring that down to 3 times or less by 2029.
This is not the first debt-heavy Hollywood merger. When Discovery Communications bought WarnerMedia from AT&T, it assumed $43 billion of AT&T's debt, leaving the new Warner Bros. Discovery with about $53 billion in gross debt as of June 2022.
For viewers, this matters off screen first. A writers' room and a crew of 200 still turn up to make the next series. Their stories only get finished if the company behind them can finalise its own.
