Paramount’s $49 Billion Debt Sale to Kick Off After Lawsuits End

(Bloomberg) -- Bankers are reaching out to investors ahead of the sale of $49 billion in financing backing Paramount Skydance Corp.'s takeover of Warner Bros. Discovery Inc., after the company settled a series of lawsuits that had held up the $110 billion acquisition.

Bank of America Corp., Citigroup Inc., and Apollo Global Management Inc. underwrote one of the largest buyout debt packages on record earlier this year to fund the takeover, and lined up significant investor demand before the deal ground to a halt amid the threat of legal proceedings. With the takeover now cleared to close, bankers plan to start selling the debt in coming weeks, said people familiar with the matter, speaking on condition of anonymity.

The package includes about $30 billion of investment-grade bonds, $7.5 billion of investment-grade loans and roughly $12 billion of second-lien bonds, targeting a wider range of dollar and euro investors than is typical for a leveraged buyout. Borrowers rarely sell a combination of high grade and junk debt.

The debt was structured to leave Paramount on the hook, rather than its lenders, if borrowing costs rise. That should prevent a repeat of the hit banks took on so-called hung loans in 2022. Back then, a sharp rise in interest rates meant Wall Street lenders struggled to sell down the debt they'd underwritten, forcing them to hold it on their balance sheets, often at a huge loss.

The financing on the Paramount deal, however, comes with no caps on the interest rate, letting lenders raise the cost to the company if the market deteriorates, which it has done since the deal was underwritten. Both the Federal Reserve and the European Central Bank have since raised rates, and corporate credit spreads have widened.

Representatives for Warner Bros., Paramount, Apollo, Bank of America and Citigroup didn't immediately respond to requests for comment.

The expectation is that the deal will sell down quickly once it's launched, the people said. The package will be sold using financial metrics from earlier in the year, meaning the financing needs to come to market before those numbers go out of date, they added.

Regulators in nearly 70 jurisdictions have already approved the merger, and the Federal Communications Commission and other federal agencies signed off on an extraordinary level of foreign financing, making it likely the acquisition can close very soon.