Larry Ellison Risk Exposed by Paramount and Oracle Debt Binges

(Bloomberg) -- As Paramount Skydance Corp. and Oracle Corp. vault into the ranks of corporate America's biggest borrowers, their links to the same man — billionaire Larry Ellison — are starting to stir angst on Wall Street.

The assumption among many investors has been that Ellison would step in to support Paramount if it got in financial trouble after taking on $52 billion of additional debt this week to help pay for its acquisition of Warner Bros. Discovery Inc. But with much of the Ellison family's wealth tied to Oracle shares as the company undertakes its own capital intensive AI buildout, the worry is the value of that safety net could come under pressure just when Paramount needs it most.

Those concerns are already being reflected in the market, money managers say. The cost to insure the debt of both companies against default has converged and is increasingly moving in lock-step, a sign investors are beginning to treat the two credits as intertwined. It's another factor lenders need to consider when assessing the mounting debt and execution risk of the firms, according to Campe Goodman, a portfolio manager at Wellington Management Co.

"You have to consider your total Larry Ellison risk," Goodman said, adding that investors should regard Oracle and Paramount as related bets rather than completely separate credits. "You probably want to consider your exposure to both."

Representatives for Paramount and Oracle didn't respond to requests for comment. Attempts to reach Ellison through his foundation also went unanswered.

Ellison, 82, is backstopping Paramount's takeover of Warner Bros., spearheaded by his son David, via a family trust that guaranteed a significant portion of the roughly $47 billion of equity financing for the deal.

Yet his support also extends beyond the acquisition itself. As Paramount worked to reassure ratings firms about the debt burden the combined company would carry, the Ellison family pledged to take all necessary steps to help bring leverage down in the coming years — a commitment that credit graders and investors viewed as a tacit promise to inject additional capital if needed.

That makes Ellison's ability to follow through on the pledge a key consideration for debtholders.