S&P Will Downgrade Paramount Skydance to BB After Warner Bros. Deal Closes

The rating cut reflects S&P’s view that the merged company will carry very high debt and face integration costs that will strain cash flow.

Overview

S&P Global said it will lower PSKY’s issuer credit rating one notch to BB when Paramount Skydance completes its acquisition of Warner Bros. Discovery, moving the company further into speculative‑grade territory.
The agency projects the combined company’s adjusted debt-to-EBITDA will be about 7.6x in 2026 and does not expect leverage to drop below roughly 5x until 2029, which it says keeps credit risk elevated for years.
Paramount Skydance has proposed an exchange of WBD junior‑lien notes for PSKY second‑lien notes and S&P assigned a preliminary BB rating to the proposed second‑lien secured notes, signaling higher risk for bondholders.
S&P agreed the merger could deliver more than $6 billion in cost synergies but said it will count those savings only when they are realized and that the costs of achieving them will likely reduce EBITDA and free cash flow in 2026–2027.
The ratings view reflects broader sector headwinds — fragmented viewing habits, rising content and sports rights costs, and AI-driven changes to content — and S&P warned that integration missteps could slow deleveraging and worsen financial pressure.